Are you looking into homes for sale in Santa Monica? Most people want to buy their own home at some point, as purchasing a home is a great way to begin building some financial security. You will build up equity in your home as you pay down your mortgage and also strengthen your credit history. However, you need to make sure you’re prepared before you start the process of buying your first home. Here are some of the top signs you are ready to buy Santa Monica real estate.
Your rent is increasing
Rental prices are on the rise in Santa Monica at the moment, and increasing rent can make it difficult to budget for your monthly housing costs and save for some of your other financial goals. It might be time to begin thinking about getting mortgage loans and buying your first home if paying your rent every month starts to feel like a poor investment, and you want to start building home equity for your future. Many renters are prepared to purchase a home once they have some financial stability. Most people are motivated by the pride of home ownership and desire some more control over their homes.
You have a solid credit score
You might also be ready to purchase one of the homes for sale in Santa Monica if you have a solid credit score. Some renters are not able to purchase a home because their credit score is too low, and they can’t qualify for a mortgage loan. If you have too much debt or a history of late payments, your credit score might not be high enough to get a mortgage.
However, if you have a healthy credit score, you are one step closer to being in a good position to buy a home. Keep in mind that most borrowers with credit scores of at least 500 can qualify for mortgage loans, but if you have a credit score on the lower side, you may end up paying higher rates and making a larger down payment. A strong and solid credit score will get you better loan terms and interest rates.
You have manageable debt
Another thing that lenders tend to look at when they’re screening mortgage loan applicants is the applicant’s debt-to-income ratio, also known as their DTI. The debt to income ratio is an important metric that is calculated by adding up all of your regular monthly debts and then dividing the sum of your debts by your gross monthly income. The higher your debt-to-income ratio is, the more risk you pose to the mortgage lender and the less likely it is that you will get a mortgage loan. Some conventional mortgage loans allow a debt-to-income ratio of up to 50%, but most mortgage lenders prefer a debt-to-income ratio of 43% or less.
You can afford the down payment
Another sign that you’re ready to buy your first home is that you can afford the home’s down payment. The down payment is usually the biggest hurdle to homeownership, especially since first-time buyers can’t use the proceeds from selling another home to fund the down payment for the home they’re purchasing. You usually need to pay at least 20% of the price of the home for conventional mortgage loans if you don’t want to pay any private mortgage insurance. However, Federal Housing Administration or FHA loans usually require only 3.5% down, and there are some mortgage loans that require no down payment. You should compare various loan programs to figure out which program is right for you.
You have enough money set aside for maintenance costs
You don’t need to worry about paying for maintenance costs when the air conditioner goes out or a pipe bursts in a rental unit. Instead, the landlord handles everything. The same can be said for homeowner’s insurance, routine maintenance, and property taxes. However, when you own a home, you are responsible for all of the costs, including property taxes, insurance, and maintenance costs.
If you have some savings set aside, then you might have enough additional money set aside to handle all of the costs associated with homeownership. That being said, keep in mind that if you put all of the money you have saved up into the down payment, then you will have no money left to handle any repairs that come up.
You are going through a huge life change
Many home renters choose to buy a first home after they go through a major life change, like getting married or having their first child. Getting a new job, having more kids, or going through a divorce are other common reasons to buy a home. If you are going through a major life event, make sure to assess whether it makes sense for you to buy a home, given your current financial situation, lifestyle, and needs.
You have a stable lifestyle
Purchasing your first home typically involves plenty of upfront costs that could take a few years to recoup, so homeownership might not be the right decision for you at the moment if you think you might move again before you can recover those upfront costs. If you are considering buying a first home, you should have a stable job and stable income, which reduces the chance that you will stop making your monthly mortgage payments and default on your mortgage loan.
You know exactly what you want in a home
If you are planning on buying your first home, you should know exactly what you want and need in a home, including the location and the kind of home. There are plenty of different types of homes out there, including duplexes, condos, townhouses, houses, and more. If you buy a condo, you won’t need to handle any yard work, but you need to be able to afford the homeowners association or HOA fees.
Looking for new homes for sale in Santa Monica? Reach out to trusted Santa Monica real estate agent Claire O’Connor for guidance.
