April 22

13 Signs That You’re Ready for Homeownership in Charlotte, NC

Buying a home is one of the most significant commitments you'll make in your lifetime.

Becoming a homeowner goes beyond being financially ready to pay your mortgage and down payment. It also means that you've come to terms with what you want for your future and are committed to sticking to your long-term plans. 

If you want to have more control over your property and don't want to squander your savings on rent, you've probably thought about buying your first home. So if you're considering buying a home in a seller's housing market like Charlotte, NC, make sure that you're prepared to deal with the tough competition and the steep prices. 

Buying a home is a huge decision that will affect your finances and your future. 

Having a solid credit score of at least 600 is one of the most important things before buying a home. Finally, becoming free of debt, having a stable income, and having enough money to pay a substantial down payment are all indicators that you're financially ready to buy a home. You should also have savings set aside for emergencies and house maintenance.

If you have a solid idea of your long-term plans and expenditures, it will be easier for your family to commit to a new home.

When your finances and future favor buying a home, make sure that all your decisions are backed by the solid expertise of real estate professionals.

This article teaches the positive signs that you're ready to buy a home in Charlotte, North Carolina.

What Are the Most Important Things to Be Ready for Before Buying a Home?

As you probably know, the entire process of buying a home isn't always a walk in the park. Before we discuss the top signs that you're ready to buy a house, make sure to research these key points about the buying process:

  1. Your Mortgage Plan: Before buying a home, homebuyers need to compare mortgage lenders. To secure a mortgage, you need a good credit score, a sufficient down payment, and proof of your income and assets.
  2. The Down Payment: To limit your mortgage costs, you must be able to put down an acceptable down payment.
  3. Your Debt-to-Income: According to the Consumer Finance Protection Bureau, home buyers need to have a 43% debt-to-income ratio to qualify for a conventional mortgage. 
  4. A Savings Plan: Banks and credit unions will want to see a history of a steady flow of money into your account. 
  5. Cash Reserve: After accounting for your down payment, have on-hand emergency funds and living expenses for three to six months.
  6. Get in Touch With Real Estate Experts: You need experts to assist you with the buying process, so find a trusted real estate agent, lenders, builders, and financial advisors.

How Do You Know if You Are Financially Ready to Buy Your First House?

Here are 13 signs that you’re ready for homeownership.

1. You've done your research about the housing market.

Before starting the buying process, make sure that you've done thorough research about market trends and rates. You can move on to the buying process after you've understood Charlotte, NC property values, and how the real estate market works.

Charlotte, NC is one of the hottest housing markets in the US. 

In fact, Charlotte ranked as the fifth hottest market in the US in 2022, with the median home priced at approximately $410,000. However, according to a study by Forbes, properties in Charlotte are relatively more affordable than in larger cities.

All this means is you must know exactly what you're getting into: a tough housing competition with low supply and high demand driving up real estate prices.  

2. You're done with spending your savings on rent.

The downside of renting is throwing away your monthly savings on rent. If you don't want to lose your hard-earned money on rent, buying a home may be your right decision.  

You can build your equity by paying mortgage payments instead of monthly rental payments. You'll be a step closer to owning a home when you build equity.

However, you should still know that renting is cheaper than buying a home due to upfront costs, such as down payment, moving costs, closing costs, maintenance and renovations.

3. You're ready to stay in one place long-term.

Renting doesn't provide you with the stability of staying in one place long-term. Your landlord can suddenly raise your rent, forcing you to look for a new home.

If you're ready to settle down in one neighborhood for the next few years, owning a home may be a good decision. 

Homeownership is a long-term investment. So, the longer you stay in the home, the better your chances of breaking even on the purchase. For the first five years of your purchase, your mortgage payments will mostly cover your interest and not the principal.

Ideally, homeowners should stay on the same property for at least 5 to 10 years. Aside from making the most of your mortgage payments, settling down will also allow you to focus on your job, spend more time with your friends and family, and build a strong relationship with your community.

4. You want control over your own space.

When you're renting, there are a lot of restrictions when it comes to making adjustments to your home. 

Anything from changing fixtures to painting, and remodeling, you’ll have to ask permission from your landlord. You’re basically living under your landlord's thumb.

The landlord will most likely pay for maintenance and repairs on the plus side.

If you want to have more control over your house and property, homeownership will give you the freedom to do all sorts of renovations and remodeling.

5. You have a stable income.

This may be an obvious point, but finding secure income can be a challenge for most because of the coronavirus pandemic. 

If you can get a secure income in the next few years, you can consider buying a home. You can also show a history of stable employment in the past. 

It'll be harder to show proof of a steady paycheck if you're self-employed. Ensure that you collect at least two years' worth of bank statements.

Most lenders will also ask borrowers to show at least two years of tax returns or pay stubs as proof of income. Lenders will also want to see proof of down payment deposited into an account at least 60 days before.

6. You're free of debt.

If your debt and credit card bills are clear, you may be a good candidate for homeownership. Having significant debt will pull down your credit score, so you'll have difficulty getting a mortgage.

As a rule of thumb, a borrower's debt-to-income ratio shouldn't exceed 43% for a standard mortgage. However, lenders prefer a debt-to-income ratio lower than 36%, with 28% of that servicing your mortgage or rent payment.

On top of that, lenders for more than just funds you’ve set aside for a down payment. They’ll also check if you have money set aside for necessary expenditures and savings.

7. You can make a substantial down payment.

The down payment is the upfront payment for your home's purchase. 

Most homebuyers think that the down payment should be at least 20% of the purchase, but many lenders accept down payments as low as 3% to 5%. According to Rocket Mortgage, in 2020, the average down payment was 6%. 

Paying as much as you can upfront will give home buyers a good credit score. In most cases, a down payment of 20% or more will also give you lower interest rates.

However, keep in mind that borrowers who make down payments lower than 20% need to pay private mortgage insurance. Private mortgage insurance (PMI) protects lenders from losing money in case the borrower defaults on payments. 

PMI is added to a home buyer's monthly mortgage payment, ranging from 0.5% to 2%. Once you've reached 20% of the loan, your lender will remove the PMI.

However, the right down payment for you will depend on your goals for your home. Suppose you need to do a lot of renovations or repairs, buy new appliances, or make any other expenditures. In that case, a smaller down payment may be necessary to avoid stacking up your debt or taking out another mortgage.

8. You don't plan on making any big expenses in the next few years.

Aside from your income and monthly payments, you should look into your goals and lifestyle for the next few years. Are you planning to make any substantial expenses after buying a home? 

Buying a new car, going back to school, or even starting a family are huge life decisions that cost a substantial amount of money.

For example, if you have just enough money for your monthly mortgage right now, getting married or having a baby next year might mean that you need to take out another loan. 

Consider if any of your big life decisions will affect your capacity to pay monthly mortgages.

9. You have a good credit score.

The most important thing for homebuyers is to establish a good credit score. If you have a low credit score, it will be difficult for you to find a bank that will lend you money to purchase a home. 

If you have a good credit score, there's a better chance that you'll get better interest rates. As a rule of thumb, homebuyers should have a credit score of 600 or more. 

If you have a low credit score, then you should probably rethink buying a home. In the meantime, improve your credit score by paying your credit card minimums on time, requesting a higher line of credit, applying for more credit cards, and improving your debt-to-income ratio.

10. You're ready to take care of your home.

Once you've paid the down payment and your monthly mortgage bills, you also need to have disposable income for necessary house maintenance and upkeep.

When you're renting, you can rely on your landlord or building manager to take care of repairs. However, when you're a full-fledged homeowner, you need to manage the day-to-day upkeep of your home. You also need to think about major repairs, including heating, plumbing, and roof repairs.

It would also be a good idea to familiarize yourself with fixing minor to medium issues. However, when larger upkeep issues pop up, you should be ready to call in and pay the necessary fees to the experts.

11. You have emergency savings.

If you have a substantial emergency fund set up, you won't have to worry about paying your monthly mortgage in case an unfortunate life event comes up.

Even though you have a stable income, unexpected financial setbacks can make it difficult for you to pay your monthly mortgage. This is why you should always have an emergency fund set up in case – knock on wood – someone gets sick, gets into an accident, or someone in the household loses their job.

According to financial advisers, you should have at least two or three months of living expenses set aside for emergencies. The best-case scenario is if you have at least a few years' worth of living expenses in your emergency account.

Unlike a one or two-year rental contract, defaulting on your mortgage can negatively affect your credit report.

12. You know what you're looking for.

Having a clear picture of what you want in your home is a good sign that the buying process will go smoothly. Whether you're planning to buy a duplex, a townhouse, or a single-family home, you should know what type of house fits your lifestyle and budget.

These are some critical questions that you need to ask yourself:

  1. What does your family value the most?
  2. What type of neighborhood do you want to live in?
  3. How many bedrooms does your family need? Do you need a home that can accommodate a growing family?
  4. What are your options for work? Education?
  5. How far are you willing to commute to school or work?

After narrowing down your choices based on your ideal lifestyle, remember that your budget will play a huge part in matching your criteria with the market of interest.

13. You're in touch with industry professionals.

A vital sign that you're ready to make a home purchase is if industry professionals back your knowledge and decision. Especially in a competitive housing market like Charlotte, North Carolina, you'll need all the help to secure a good deal.

You need the assistance of a professional real estate agent who's willing to listen to all your concerns about your finances and your future. Trusting a local buyer's agent is a wise choice, especially if it's your first home purchase.

Final Thoughts

A local real estate agent in Charlotte like me, Nancy Braun, is the key to having a smooth buying process. I've been in the real estate industry for almost 50 years. After falling in love with North Carolina 20 years ago, I've dedicated my career to becoming Charlotte's #1 real estate choice .

From learning about the neighborhood to finding a lender, negotiating deals, and settling down in your new home, you can always rely on us at Showcase Realty.


Charlotte NC Real Estate, Homes For Sale In Charlotte NC, showcase realty

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