Are You Ready to Buy a Home? Key Insights for Potential Homebuyers
- A recent Zillow analysis reported that approximately 7.9 million U.S. households were 'income mortgage-ready' as of 2022.
- This suggests a growing trend among renters who may now have the financial capability to transition into homeownership.
- Increasing mortgage readiness could reshape the housing market dynamics in the near future.
As the housing market evolves, approximately 7.9 million families are identified as "income mortgage-ready," meaning they can afford mortgage payments that constitute 30% or less of their total income, according to Zillow. With rising rental prices, experts suggest that individuals nearing the end of their leases should consider purchasing a home as a viable alternative. Melissa Cohn, regional vice president at William Raveis Mortgage, emphasizes the importance of evaluating one’s financial readiness in light of increasing rental costs. Understanding one’s buying power is crucial for prospective homebuyers. Brian Nevins, a sales manager at Bay Equity, highlights that many potential buyers are unaware of their credit status or fear checking it due to misconceptions about its impact. Experts recommend monitoring credit scores well in advance of a home purchase to allow time for necessary improvements. Additionally, outstanding debts, such as student loans and credit card balances, can affect mortgage approval. To establish a realistic home-buying budget, individuals must calculate their debt-to-income ratio. Nevins explains that ideally, housing expenses should not exceed 28% of gross monthly income, while total debt payments should remain under 36%. However, some lenders may approve ratios as high as 45%. For instance, a person earning $6,000 monthly with $500 in debt could afford a mortgage payment of $1,660, adhering to the 36% guideline. Consulting with a mortgage professional can provide valuable insights and help potential buyers navigate the complexities of home purchasing. Cohn advises that these experts can outline necessary steps and financial goals, ensuring buyers are well-prepared for the journey ahead.