Are You Ready to Buy a Home?

By Charlestien Harris, Retired Financial Counselor at Southern Bancorp

June is commonly known as National Homeownership Month – a time to celebrate the American dream of owning a home and to promote the benefits of homeownership. National Homeownership Week began in 1995 as a strategy by President Bill Clinton’s administration to increase homeownership across the nation. In 2002, President George W. Bush expanded the observance to the entire month of June.

As an Accredited Financial Counselor, I am often asked, “How do I know when I’m ready to buy a home?” I can’t make that decision for you, but I can help guide you in the right direction. Throughout this month, I’ll be writing a series of articles on homeownership. In this week’s article, I’ll provide a list of questions to help you determine whether owning a home is the right choice for you. Be as honest with yourself as possible – your finances will definitely change, one way or another. Let’s get started.

1. Are you sure you want to buy a home?
   This is a critical question to begin with. Homeownership is not for everyone. Buying a home requires a long-term commitment from all parties involved. Consider both the pros and the cons – yes, there are some – before making your decision. Do your homework!
2. Do you have steady income and stable employment?
   These two factors are essential. You’ll need to provide documentation for at least the past two years. This information helps both you and a counselor determine how much house you can afford.
3. Have you created a budget that includes your home purchase?
   Your expenses will likely increase when you buy a home. Maintenance, insurance, utilities, and other costs may change. Your budget should account for these increases, and your income should be able to absorb the added expenses, including your new mortgage payment.
4. How is your credit history?
   Remember, you’re asking a bank or financial institution to lend you money for one of the biggest purchases of your life. Your credit score and payment history play a major role in the loan approval process. Ensuring your credit is in good shape is a key step toward securing a mortgage.
5. Do you pay your bills on time?
   Late fees can be costly. Paying your bills on time helps you avoid these fees and demonstrates financial responsibility. Falling behind on your mortgage could lead to delinquency or even foreclosure – something you definitely want to avoid.
6. Do you have a down payment saved?
   This is often referred to as “having skin in the game.” The amount you’ve saved will affect how much you need to borrow. Saving is a crucial part of your budget, and having funds set aside for emergencies is a smart move.
7. What does your debt-to-income ratio look like?
   Your debt-to-income ratio is the percentage of your income that goes toward debt payments. To calculate it, add up all your recurring monthly debt payments – such as your mortgage, car loan, credit cards, or student loans – and divide that total by your gross monthly income.
8. Are you ready to care for and maintain a home?
   As a homeowner, you’ll be responsible for repairs and maintenance. These costs can add up and must be factored into your overall affordability.
9. Have you been pre-qualified or pre-approved by a lender?
   Pre-qualification is an estimate based on limited information. Pre-approval is more reliable, as it involves verification of your income and documentation. Knowing your loan amount gives you a clear idea of how much house you can afford.
10. Have you researched the different types of loan products available?
    There are many loan options to choose from. Understanding which ones you qualify for can help you make the best decision. Additionally, down payment assistance programs and grants may be available for low- to moderate-income families.

If you answered “yes” to most of these questions, you’re probably ready to buy a home. If you answered “no” to most, you may need more time to prepare. If you answered “no” to questions 2, 3, 5, 6, 7, and 9, you likely need to take additional steps before you’re ready.

One important step is to meet with a HUD-approved counselor. Southern Bancorp has certified counselors on staff, as well as an entire team of mission-focused mortgage lenders, who can assist you with any questions about the home-buying process.

For more information on this and other financial topics, you can email me at charlestienharris77@gmail.com or write to me at Post Office Box 1825, Clarksdale, MS, 38614.

Until next week – stay financially fit!