With low mortgage rates and many people leaving larger cities for rural and suburban towns, is now a good time for you to buy a home?
It's been a challenging year on many fronts, with many out of work or furloughed and struggling to make ends meet. Despite the economic downturns, the number of first-time homebuyers increased over the summer, compared with the previous year.
Assistance programs for first-time homebuyers are still available, and many people are taking advantage of FHA and USDA loans to buy their first home. But even with Federal assistance, buying a home is still a significant undertaking, with many considerations. Here are a few questions to should consider before deciding whether now is the best time to purchase a home.
Do You Qualify For Federal Mortgage Assistance?
Unless you've got enough cash to buy a home outright, you're going to have to apply for a mortgage to be able to purchase your first home. As mentioned above, many Federal assistance programs are worth exploring if you're thinking of buying your first home. Between VA Loans, Federal Housing Administration Loans, and USDA Loans, there are options that can help reduce your down-payment requirement, among other things, so review the qualifications to see if you qualify.
Do You Have Enough Savings?
In most cases, you're going to have to make a down payment of at least 10% of your home's purchase price to qualify for financing. While it's true that assistance programs can reduce this to 3.5% or even 0% (in the case of a USDA loan), you'll need cash on hand for other closing costs, including property taxes, maintenance needs, and homeowner association fees. If you're living paycheck-to-paycheck, this surge in costs can easily put you in debt that will be difficult to escape.
How's your Credit Score?
You'll have difficulty obtaining approval for a loan unless your credit score is in excellent shape. If your credit score is on the low side, and you manage to get approved for a loan, you'll pay dearly for it with an unfavorable interest rate that amounts to many thousands of dollars over the course of your mortage term. If you're committed to moving forward, you should take the opportunity to boost your score before applying.
Do You Have a Stable Job?
To be considered for a mortgage, you'll need to show stable employment history. Nobody knows what the future holds, especially given the pandemic and talks of recession. But it's essential you feel confident that you will be able to steadily earn a paycheck through the next several years before making the leap to homeownership. Defaulting on a mortgage will wreck your finances and make it more difficult for you to purchase another home in the future.