Buying a home is a major life milestone. Your heart might be set on becoming a homeowner, but red flags might
indicate you're not yet ready to make the leap.
Homeownership represents much more than a financial investment, and there are several reasons why potential
homeowners might want to delay a home purchase. Here are four of them—and advice on how to overcome these
obstacles.
1. You Have Too Much Debt
To get approved for a mortgage, you must show you can handle all of the expenses of owning a home (including the
ones that aren't rolled into your monthly mortgage payments). You also have to meet your other financial obligations,
and that might be a challenge if you already have a mountain of debt on your plate.
How to overcome it: Pay down your debt to a manageable level. If you've accumulated a lot of debt over time,
consider a personal loan to consolidate them into one streamlined, and preferably lower-interest, monthly payment.
And avoid getting sucked into a new debt trap by cutting spending and diligently paying down debt. A debt
consolidation calculator can help you determine how to strategically consolidate and pay down your debt.
2. Your Credit Isn't Stellar
Your credit history and credit score are closely linked to the mortgage pricing you'll receive—and that impacts your
monthly payments for the life of the loan. A good starting point is to give yourself a credit check-up to see where you
stand. If your credit score is not optimal, you'll pay more for a mortgage. Your credit score today will have a huge
impact on the homes you're looking at and can afford. It may be sensible to wait to buy and work on your credit.
How to overcome it: To boost your credit score, pay your credit cards and other debts on time. Ideally, credit cards
should be paid off in full every month. Avoid opening new credit lines unless you're establishing a credit history.
Finally, keep your credit utilization ratio to 30 percent or less of your available credit limit for each credit account. In
other words, your balances shouldn't exceed 30 percent of your maximum credit limits.
3. You Don't Have Enough Savings
Buying a house comes with a lot of upfront expenses that go beyond your monthly mortgage payment. Expect to pay
2 percent to 4 percent of a home's purchase price in closing costs. Plus, there's the down payment (anywhere from 3
percent to 20 percent of the purchase price, depending on your loan type) and moving expenses to factor in.
But it's the hidden costs of homeownership that take many new homeowners by surprise. These might include
homeowners association dues, condo/assessment fees, routine maintenance, utility bills and major repairs. Ideally,
homeowners should save roughly 1 percent of the home's purchase price each year for maintenance expenses.
To save more, pay yourself first by depositing a set amount from each paycheck into a savings account. If you have
to start small, that's OK. Consider opening a high-yield savings account to accrue interest on your cash. Cut back on
unnecessary spending such as monthly subscription services, eating out, impulse shopping and other financial vices.
Depending on your income and credit profile, you may qualify for homebuyer assistance programs that can help you
pay for down payment and closing costs for a home.
4. You Want a Carefree Lifestyle
If you're someone who moves frequently, buying a home might not make financial or practical sense. Lifestyle plays a
huge role in the decision to rent versus buy. Remember that the bigger the house, the more maintenance and
upkeep. If you want to keep things low-key, buying a condo or continuing to rent might make more sense until you're
ready for more responsibility.
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