Making the transition from renter to owner is surely not an easy feat within the United States and many countries in the world. Particularly in the United States, you need a very high credit score and minimal debt margins in order to be approved for a mortgage. That being said, even if you are outside of the United States, you want to be fiscally certain that you are ready and able to take on the responsibility of having a mortgage.
Here are four signs that you are ready to make the transition from leasing to owning:
- Credit: Regardless of where you are in the world, you should think of the concept of credit in the context of your debt to income ratio. The reason for this is that you should use the United States credit model in order to assess your financial net worth and how adding on a mortgage payment would affect your financial future. Many people do not do this and end up overextending themselves in the long run. Thus, it is pertinent to plan ahead to avoid future pitfalls in this respect.
- Down Payment: You should make 100% sure that you are able to afford a sizeable down payment. In fact, in an ideal world, you should be putting as much down as possible. The reason for this is that you will be able to owe less in the long home and put what you were going to pay in an extended mortgage into another home down the road perhaps. This kind of thinking that takes you beyond making minimum payments is what is going to get you financially ahead in a major way.
- Your Mortgage Payment Will Be Less Than Your Rent Payment: There is a time in one’s life where it costs the same to pay a mortgage that it does to rent. In this context, it is much more fiscally prudent to buy because now, your payments will be going towards the end goal of full ownership. This will allow you to utilize your investment on future investments and grow your net worth in this way.
- Your Mortgage Payment Will Not Be More than 33% of Your Monthly Income: This is an error that many individuals make. You should not be spending more than 33% of your monthly salary on rent or a mortgage. This will enable you to save, invest, and live well in other sectors of your life. If you practice this thought process, you will not be overextended financially.
Consider these viable tips when deciding if you are fiscally ready to purchase real estate. If you are, then wonderful, you absolutely should. If you play your cards correctly, you will be able to financially position yourself to make many more successful investments in the future. Thus, make a realistic assessment of your financial situation or meet with a professional. This way, you will be able to ensure that you are completely sure that you are ready to make your first real estate purchase.