When’s the right time to buy a home?

While there are those who understand the real-estate market well, others see it as a foreign language like the NASDAQ.

Unfortunately, many people are afraid of what they don’t know, making it difficult to pull the trigger on a big decision.

The truth is… you don’t have to be a real-estate guru.

You just need to know what qualifies you for a home loan, and how much you qualify for. After this you will know whether it makes financial sense or not.

So, you are probably ready to purchase a home if you have these three things:

1. Stable Income

It seems like a “no brainer” that you need a job to qualify for a home loan, but having a stable income is more than just having a job. Most loan programs require a borrower to have a work history of at least 2 years. Furthermore, a borrower has to have been in the same line of work for at least 2 years. That doesn’t mean you have to work at the same company for two years, just that you were working in the same field.

2. Good Credit

Credit score requirements vary by loan program. While some programs accept a score as low as 580, others accept a minimum of 640. With that being said, having a credit score of 640 or higher is a great indicator that you are ready to shop for a home. However, it is a good idea to refer to loan program guidelines or consult with a loan professional first.

Another thing to consider is your Debt-to-Income ratio (DTI). To calculate this, simply divide your monthly credit expenses by your gross monthly income. A health DTI should be 31% or below on the front end, and 43% or below on the back end.

3. Funds to Close

As economist Milton Friedman said, “There’s no such thing as a free lunch.” When you consider buying a home it is very important to consider the costs associated with it. Costs such as: real-estate fees, lender fees, third party fees, taxes, and insurance.

While there are down payment assistance programs that offer funds to pay for down payment and closing costs, it is a good idea to start saving up before you shop for a home. Another way to reduce costs is by negotiating that the seller pay some of the costs through seller concessions, however this depends on the scenario.