6 Questions To Ask Yourself Before Buying A House

The decision to buy a house at the Lake of the Ozarks is a big one and should not be made without careful consideration of all the associated factors. While the desire to own your own home may be there, it's important to make sure you are truly ready to make such a big commitment financially and mentally. This week, Arrowhead Title, Inc. is here to help you evaluate some of these associated factors. Here are of a few examples of the types of questions you should ask yourself before buying real estate at the Lake of the Ozarks.


1. Am I Ready For Such A Big Financial Commitment?
First and foremost, owning your own home is a huge financial commitment. As the homeowner, you and you alone will be responsible for making your monthly mortgage payment, covering the cost of any desired upgrades, paying for all of the utilities (trash, electric, water, sewer, etc), and paying for any necessary repairs. Owning your own house is also a valuable financial asset and can be a great tool towards building wealth in the long run, but it's important to make sure that you will be able to cover all of the associated costs.

2. Do I Have A Solid Understanding Of My Monthly Expenses?
As a general rule, everyone should have a budget they use to track their monthly income and expenses. If you are thinking about purchasing a home in the near future, this becomes an even greater necessity. Failing to meet the financial requirements of homeownership can have serious consequences, including foreclosure and wrecked credit. Before you buy a house, we strongly recommend that you establish a monthly budget to track how much money you have coming in each month and how much goes out. This way, you will be able to know with confidence how much you can afford to spend on your new home.

3. Can I See Myself Here For 3+ Years?
Buying a house has a lot of upfront costs. Between the cost of the home appraisal, home inspection, earnest money, closing costs, and your down payment, the home buying process can become expensive very quickly. Once you own your home, however, your monthly mortgage payment will typically be far less than your monthly rent payment would be for the same property. If you only plan on living in your home for a short while, renting (instead of buying) may save you money. However, if you plan on living in your new home for at least three years, the lower monthly costs can outweigh the upfront expenses; owning may be cheaper than renting.

4. What Is My Credit Rating?
If you haven't given much thought to your credit score recently, now is the time to do so. Your credit rating will have a huge impact on the affordability of your home. If you have a good credit score, you are much more likely to get a lower interest rate and better monthly payments. With a poor credit rating, you will probably be viewed as a greater risk to the lenders and will be given a higher interest rate as a result. If you have a poor credit score, it may be wise to wait a little longer before buying a house so you can give yourself time to raise your score.

5. Is My Source Of Income Stable?
It is (of course) impossible to predict the future, but it's important for prospective homebuyers to spend some time looking forward. Specifically, look at your source(s) of income. Can you be confident that your income will be stable for at least the foreseeable future? As we have discussed, owning a home is a big financial responsibility; before taking the plunge, you'll want to be confident that you can rely on your source of income in the coming years.

6. How Much Debt Do I Already Have?
One of the key factors lenders look at when evaluating a loan application is the debt-to-income ratio (the "DTI ratio"). The debt-to-income ratio, as its name suggests, indicates how much of your income is already going towards existing debts. These debts may include (but are not limited to) personal loans, credit card debt, student loans, car loans, and an existing mortgage. If your current debt makes up 38-41% of your gross income, you may be denied a loan for a new house. Depending on your situation, it may be wise to pay off some of your outstanding debts before buying a house.

Remember Arrowhead Title For Your Title & Escrow Needs
When you are ready to buy, we hope you will remember our title insurance company at the Lake of the Ozarks as your trusted title and escrow professionals! Our experienced staff would be honored to help you protect your biggest investment. Visit our website or give us a call to learn more about how we can help you!

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750 Bagnell Dam Blvd Suite B
Lake Ozark, MO 6504

Comments

  1. Am I Ready For Such A Big Financial Commitment? This question is the one that I overlooked as I am planning to buy a Pueblo de Oro Cebu house. Thanks for this.

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