June 13, 2020
Owning a home in Marin County is synonymous with building wealth, and the sooner you take the plunge, the more equity you are building in your future.
It is also one of the largest financial decisions of your life! So how do you know when you're ready to buy a home? I’ve come up with 5 questions I encourage my clients to ask themselves:
1. What’s your debt to income ratio. Evidence from studies of mortgage loans suggest that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43 percent debt-to-income ratio is important because, in most cases, that is the highest ratio a borrower can have and still get a Qualified Mortgage.
2. How is your credit? Are you rocking a 820 credit score or scraping by with a 620? Take the time to clean up any lendor errors, fraud issues and talk to your banker about what you can do to be more attractive to lenders.
3. What can you afford? Of course, this will most likely be the single largest investment you’ve ever made. And I’m not just talking about the down payment you’ll need to finance the home, but also the closing costs, insurance, property taxes, etc. And while you may be able to put as little as a 3.5 percent as your down payment, talk with your lender about increasing that amount in order to get a better mortgage rate and lower monthly payment.
Different homes have different costs associated with them, such as HOAs, berth fees for floating homes, etc. Talk with me about any additional costs associated with the homes you may be interested in looking at to ensure we stay within your budget.
4. Are you ready to settle down? Does your job or business look stable? If you are buying with another person or family member, is your relationship strong enough to weather the highs and lows that come with life? Are they financially stable? Do you both see this as either a short or long term investment? Have you discussed how you would handle a potential buyout, if necessary?
5. Can You Fix a Leak? You can’t simply call the landlord; as a homeowner, you need to have the skill to fix problems yourself or the resources to pay others to fix them.
Now that you’ve addressed these questions, I fully encourage you to pursue homeownership, if it’s right for you. I am a big believer in real estate investing as soon as you are ready and your lifestyle permits.
If you were not able to answer yes to these five questions – that’s okay! It just means the timing is not right – right now. Building a relationship with a Realtor® is also an important step toward home ownership. I’ll be ready to help you when the time is right, and am here to answer any questions you have in the meanwhile. Tracy Curtis, Coldwell Banker Real Estate
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