As exciting as it is to buy your first home, it’s also the single most expensive purchasing decision you will likely make. It’s not to be taken lightly. You need to know what to know when buying a house so that you are in the best position to go through with it.
Before you check out some Minnesota rural property for sale, you should know if it is the best time to buy a house in Minnesota, along with everything else there is to know about buying your first house. Here’s how you check your readiness to buy your first home.
- You Have Your Finances in Order
Almost everyone that buys their first home – or indeed their second home – does so with the help of a mortgage. It’s rare to find someone who can buy the property outright. In order to get a favorable mortgage, you need to already have a good credit score. Banks like to see people who have a “fair” score of between 650 and 700 or better. The better the score, the better the options you’ll have.
As well as considering what credit score you have, lenders assess your debt-to-income (DTI) ratio. The DTI ratio assesses how your monthly income compares to monthly debit expenditure, and they include the mortgage in those calculations. If you are still paying off other loans, like car loans and student loans, then it could drastically affect your DTI and ruin your chances of getting a good mortgage. The best DTI is 36% or lower.
You could still land a mortgage even if you have a low credit score or a high DTI. The problem is that you could have trouble securing as much money as you want. These mortgages also come with higher interest rates, shorter terms, or a combination of both.
- You’ve Saved Up for the Down Payment and Closing Costs
It is possible to secure a home without making a down payment as long as you meet the other eligibility requirements, but you won’t have as many options with your mortgage. You’ll also have to pay greater interest rates on that mortgage and secure it through mortgage insurance.
There are also closing costs to consider. These costs are paid at the time of closing (when the sale is complete). These costs include professional fees like escrow fees, lender’s fees, and attorney fees, as well as premiums on home insurance and any other costs generated by the process. The average figure for closing costs in the US is $7,200.
- You’re Ready to Settle Down
One of the most important parts of knowing if now is the best time to buy a house in Minnesota is knowing that you’re ready to settle down. Buying a home means committing to living in it for at least five years. That’s the average amount of time it takes to build up equity to the point that you could make a profit (or even break-even) by selling it. You will almost definitely make a loss if you try to sell before then.
Another important consideration is the neighborhood. You want to be sure that you purchase a home in an area you would be comfortable living. There are lots of great places to live in Minnesota so be sure to look around or discuss your options with a letting agent. They have a great understanding of the area and are sure to be able to recommend the right Minnesota rural property for sale for you.
- You’re Ready For the Costs of Owning Property
Knowing how to purchase a home is just the first step. You also have to be prepared for the maintenance and utility costs. As a renter, those costs are likely covered for you. As a homeowner, it’s on you to pay them. There are also the costs of being a part of the Homeowners’ Association. Do the math ahead of time to make sure you can keep up with all of these costs.
- You Want More Freedom
One of the best signs that you’re ready for homeownership is that you’re ready for the freedom to do what you want with your house. You want to cast aside the shackles of being a renter and decorate your home however you please, get a pet if you want, and do anything else your renters’ agreement says you can’t.