(MoneyHippo.com) – Considering the enormous growth in the housing market since the beginning of the coronavirus pandemic, some people might be unsure whether they can or should buy a home. When making this decision, there are two factors to consider: whether you can afford it and if you will overpay in this inflated market. Certainly, no one wants to overpay on a home only to have it drop in value, but timing the market can be nearly impossible given the number of factors playing into it.
Outside of that, the best thing to do is look for signs you are ready to make the leap.
1 – Have Enough Saved
Before considering buying a home, realize more goes into homeownership than the mortgage payment. You’ll need to have enough money for home repairs, utility bills, taxes, and inside and outside maintenance. You’ll also need a downpayment, which is a minimum of 3.5% of the purchase price, but the bank could require more.
2 – Ensure Your Income Will Cover Debts and Expenses
Make sure the home expenses you plan to take on don’t require too much of your income and save at least three months of expenses in the bank. Ideally, you want to keep your mortgage at or below 28% of your monthly income and 36% of all your debt combined. So, if you bring in $5,000 per month, you don’t want a mortgage payment over $1,400, and you want your total debt under $1,800 (including the mortgage.)
Dave Ramsey has some tips for timing the housing market:
Once you run the numbers and look at the big picture of homeownership, reach out to reputable lenders to see if you qualify for a mortgage. They can help you determine how much house you can buy. Next, it’s time to go shopping.
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