4 Questions to Ask Before Buying a Home in 2022
Run through this list before moving forward with a home purchase.
- Buying a home is a huge undertaking, especially with low inventory and rising prices.
- Before you make that leap in the new year, make sure you're likely to qualify for a mortgage and can afford a place of your own.
Buying a home is the sort of thing you really need to prepare for. This especially holds true if you're looking to buy in 2022.
Right now, the housing market is starved for inventory. That's making homes cost a lot more than usual. If you're hoping to purchase a place of your own next year, here are four important questions to ask yourself first.
1. Is my credit score in good shape?
If you'll be needing a mortgage to finance a home purchase in 2022, you should know that the higher your credit score is, the more likely you'll be to get approved for a home loan -- and at a more favorable interest rate. The latter is important because chances are, home prices will remain high for much of 2022, if not throughout the entire year. And so you might need a lower interest rate on your mortgage to compensate.
If your credit score could use some work, take a few months to boost it before applying for a mortgage. You can do so by paying off existing credit card debt, correcting errors on your credit report, and making sure you're paying all other loans and bills on time.
2. Do I have a stable job?
Thankfully, the U.S. economy is in a much better place now than it was at the start of 2021. At the same time, it's important to assess your own job situation if you're thinking of buying a home in 2022. If your job is steady, that's a sign that homeownership may be right for you. But if you're still worried about layoffs, you may want to hold off on your plans to buy a home.
3. Do I have enough money for a 20% down payment?
There are plenty of mortgage lenders that will allow you to put down less than 20% of your home's purchase price at closing. But if you don't make a 20% down payment on a conventional mortgage, you'll get stuck paying private mortgage insurance (PMI), which is a costly premium designed to protect your lender. Given that home prices are high, and that you may be on the hook for a larger monthly mortgage payment because of that, you don't want to add to your costs by having to pay PMI.
If you're short of meeting that 20% goal, you may want to look at getting a side job temporarily. You can use your extra earnings for home-buying purposes since the money won't be earmarked for other bills.
4. Can I afford a home I'll be happy with?
We'll be starting off 2022 with very high home prices. You may be in a position to buy a home -- but can you afford the home you actually want?
A home purchase can be a long-term investment. It's important you find a home that suits your needs and is located in a neighborhood you want to live in. Do some research and make sure you're in a position to buy a home you'll actually enjoy. If not, it could pay to wait until more inventory hits the real estate market and property values start to come down.
Buying a home is a huge step -- one you may or may not be ready for in the new year. Ask yourself these questions before taking that leap so you don't regret your decision afterward.
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