How do you know if you are ready for a mortgage?

by on Sep 26 2013 - 2 Comments

New Home Mortgage

Unless you are incredibly wealthy or wait a long time to buy your first home, you are going to need a mortgage. Taking on a mortgage is a big responsibility that should not be taken lightly. At the same time, it comes with the benefit of owning your own home and usually have a lot more space than you would if you were renting.

The most important thing you need to decide when it comes to buying a home is whether or not you are ready for a mortgage. Today I have a few things you should take into consideration when making this choice.

Factor in unexpected expenses

When you are renting the typical expenses are your actual rent check plus utilities. If something breaks you can simply call your landlord and have the repair completed by them or a hired professional. This simply isn’t true when it comes to owning a house. Unexpected expenses happen and they need to be a part of your budget. I bought a house about a year ago and have had unexpected expenses ranging from $100 all the way up to $550 (broken garage door coils). Additionally, it’s important to factor in the cost of home maintenance. If it’s your first home you will likely need to purchase things like a lawn mower, tools, and other supplies that previously were likely of no concern to you.

If you are trying to decide how much you can afford, first consider using a mortgage calculator that will help you gauge the monthly cost of your mortgage. Then add a certain percentage on top of that for unexpected expenses and routine home maintenance. Also keep in mind the fact that maintenance will come with a loss in time if you decide to do it yourself – the lawn isn’t going to cut itself!

Secure Financing

Most people want a house, but if you can’t secure financing through a mortgage you may be forced to continue renting until your credit and/or income is higher. When you first visit with a mortgage lender they will ask for your past two years of tax returns, recent pay stubs, balance in your accounts, etc. If you go to a knowledgeable lender, they should explain all the options available to you as well as what may be impeding you from getting a mortgage.

If you can’t secure financing, be sure to discuss the reasons why with your mortgage lender. It could be from bad credit, too many monthly expenses relative to your monthly income, or not enough money in your bank account. Use this information to make a plan to address the issues so that you can be on track to securing financing in the future.

The Market

I was talking to my friend’s parents a few months back and they said that a good interest rate when they bought their home was in excess of 10%. Today’s interest rates are at rock bottom and offer a great opportunity for someone looking to purchase a home and stay in it for a long period of time. Discussing the likelihood of higher or lower rates is beyond the scope of this post, but I think there is a general consensus that rates really can’t get much lower, and if they do they are bound to move back up sooner rather than later.

Another important fact to consider is that the market did face a crash back in 2008. Yes, it’s hard to time the market and some will argue that homes are still overvalued, but if you haven’t bought a home yet you dodged the real estate bubble and you can be much more confident that you are not buying at a peak.


There are many things to take into consideration when trying to decide if now is the right time to take out a mortgage and purchase a home, especially if it’s your first home. I certainly didn’t cover everything, but I hope that you found my list useful.
Photo by pnwra

Tahnya Kristina
Tahnya Kristina

Oh I don't want a house...ever.  I know you love your house David but it just seems like a lot of work to me. No thanks.  I like paying rent to have no responsibility, no ties and a handy man always on call.