Preparing Today to Buy a House in 5 Years Owning your own home is the dream of a lot of Americans. You know you’ve made it in the world when you can say that you have bought your own home. That dream is easily shattered though when you buy it before you’re ready. One of the major reasons the housing market crashed was because people hadn’t prepared properly for their 30-40 year investment in a home. They weren’t ready for the financial burden of their loans, and defaulted on them by the hundreds, to thousands. Preparing properly for their financial debts would have saved a lot of people the financial hardship that came from defaulting on a loan.
Preparing to Buy a Home This post is designed to help those planning to own their own home in the next 3-5 years to get ready for that financial burden. There are some basic financial principles to consider. Are your finances in order now? Do you have a finger on your debt? Are all of your bills paid on time? What does your credit look like? If they’re not ready now, how can you expect to afford an added bill of $1,000 a month? If you’re serious about this goal, you will need to be well practiced at living within a budget. Obtaining a loan of this magnitude will need to be properly taken care of. Begin now to live within a budget. Also compare your current income to the price of the average mortgage of a house you would like to live in one day. Do you make enough extra money to not only cover the mortgage, but also the utilities, home insurance, HOA fees, and other expenses that come with owning a home? If you’re not, then you will have to do some serious career evaluation. You might need to find a new job, push for a promotion, or get another job to afford such a thing.
If you’re considering the third option, remember that you would have to keep that job until either (1) you got promoted, or (2) you paid off the loan (in 30-40 years). Keeping up 2 jobs is extremely exhausting, and it might not be sustainable for very long.
Preparing Your Finances The next thing to consider is your current debt-to-income ratio. The ideal is to owe no more than 36% of your income to outside debts. Anything more than that makes you a potential liability. This will limit your ability to obtain lower interest rates and what kind of home you can buy. The more expensive ones will be out of your reach. Determine your current debt-to-income ratio and make adjustments. Finally, make a purchasing decision based on how long you plan to stay in the area. If you know that you will be moving from the area in 5 or 6 years after purchasing, then why buy a big house? Buy one that’s a bit smaller and a bit cheaper. The debt will be easier to pay off, and it won’t be as hard to leave. On the other hand, if you plan on staying for a while, then you can be more open to a larger house, more expensive home. Take into consideration how long you intend to stay. Luxury Homes is in the business of helping residents get homes they can afford. They specialize in getting people into modular homes in Utah. Modular homes in Utah are great alternatives to full-sized options when you plan on staying for a short amount of time. There’s nothing better than getting the right home at the right time, that is truly fulfilling your dreams to be a homeowner someday.