Metrics That Show You Can Afford to Buy a Home

You may have decided to buy a house by the time you were 30 or by the time you had lived in the same city for three years. However, these can be relatively arbitrary ways to determine that it’s time to buy a home. Ideally, the amount of money in your bank account and your credit score will help to determine when it’s time to buy a home.

Do You Have an Emergency Fund?

Before buying a house, be sure that you have an emergency fund that can last for at least three months in the event of a job loss. That money could also be earmarked for expected or unexpected repairs around the house. In many cases, lenders will not make traditional home loans for those who can’t show evidence of sufficient savings or liquid assets.

What’s Your Credit Score?

Generally speaking, lenders want to see a credit score of 700 or higher from those who apply for a mortgage. However, you may be able to get a traditional loan with a score of 640 or higher or a government loan with a credit score of 550 or higher. In addition to your credit score, a lender will assess your creditworthiness. This means looking at your debt-to-income ratio with and without the mortgage. Ideally, you will have a debt-to-income ratio of no more than 28 percent before the mortgage and 36 percent with it included. (Read on why you should consider reverse mortgage options here.)

Is Your Income Stable?

The best loan officer in Las Vegas will want to see that your income is adequate to cover the mortgage now and in the future. You will also want to make sure that there is enough coming in to cover the mortgage payment, pay other bills and save for retirement. Therefore, be sure to determine a price point and look for loan products that won’t leave you house poor for months or years to come.