Everyone at some point in their life will find themselves in the dilemma of home ownership vs. renting. Many will immediately come to the conclusion that buying a home is a much better choice than renting, after all your money is not going to waste and in the end you will have something to show for. However, many things need to be considered before you decide to purchase a home, the first being, are you cut out for home ownership. Prior to looking at your first house for sale in Markham consider your credit report, debt ratios, job stability, and maintenance costs and then make an informed decision.
Your credit score will determine the interest that will be offered to you. A FICO score below 620 shows that you are a high risk for lenders and as a result you will be faced with a high interest rate, which could send you spiraling into bankruptcy. Furthermore, four late payments will disqualify you from obtaining the loan.
The two ratios that lenders consider before offering you a mortgage are front-end and back-end ratios. The front end ratio consists of the mortgage payment plus taxes and insurance divided by the monthly salary, and the back end ratio in addition includes other debt payments added onto the mortgage payment, taxes, and insurance divided by the monthly salary. If you have a debt ratio that is 50% or more then you are a high risk for lenders, and as a result may not qualify for a loan.
Before taking out a mortgage also consider your Job situation. Is your job position secure? Is the company in jeopardy? How easily can you find another job? Does your job require relocation, and will you need to sell your home? When moving to another place, a 10% appreciation in your home value is required to cover the costs. Consequently, you will need to stay in your new home for a longer period of time before you profit from the re-sale.
It is also important to consider maintenance costs prior to buying a home. Whether or not you are the DIY home renovation expert, it is advised to put aside 5% of the purchase price for maintenance fixtures.
If you find that your credit score is on the low end, that your debt ratios are high, that your job is at risk, and that you are not capable of setting aside 5% of the home purchase for renovations, it is likely that you are better off renting for the time being. In the meantime work on cutting down your costs and increasing your income to reduce the mortgage/debt ratio below three, when it financially makes sense to purchase a home.