"Do I want to buy a house now?" Interest rates are low, and you’re dreaming of how nice it would be to own your own home, how such an investment could pay for your child's college education, or just about settling down in a certain community. Once you decide you want to buy a house, your thoughts will turn to whether you are ready to buy. Are you in a career path that has you staying in the area for at least a few years? Is your family at a stage that would welcome the purchase of a home? And, of course, are you financially able to make such an investment? Here are some of the most important factors to consider in assessing your ability to purchase a home.

1. Is your job history fairly stable? A steady income is one of the most important factors a lender will use in determining whether or not to approve you for a loan. Steady job history suggests that you will be able to pay back a mortgage loan. So, what would be looked on as steady employment? Generally, if you have been working consistently for about the last two years in the same line of work (not necessarily in the same job), a lender will consider your job history stable. Recent changes in employment don’t decrease your chances of getting a loan. Job moves without cuts in pay are generally viewed favorably in assessing your job history. Neither does this general rule mean that you won't qualify if you have not been working continuously for the past two years. You will just need to give satisfactory explanation for gaps in employment. If you just left the military or finished school, or if you could not work due to illness or you were temporarily laid off, your lender will understand that these factors do not make you less likely to make faithful mortgage payments.

2. Is your credit acceptable? Basically, this question is asking if you have a record of paying your rent and bills on time. Lenders want to know if you handle credit responsibly and if you can be trusted to make payments on your mortgage. Before you are given a loan, a creditor will run a credit check to verify your debts, the amount of your monthly payments, and the length of time remaining before they are paid in full. Credit bureaus keep records of consumer debt, and you can request the same credit report your lender will order. It is a good idea for you to do so, in order to have any inaccurate information corrected. If you have never used a credit card or if you have never borrowed money, you can establish a credit history by compiling documentation of payments to landlords and utility companies. This is called an alternative credit history.

Just what is negative credit information? Well, that would include late payments, repossessions, judgments, liens, and bankruptcies. A few late payments probably won't prevent you from getting a loan, especially if you can offer reasonable explanations for the late payments. Even past foreclosures and bankruptcies may not keep you from getting a mortgage, although you may not qualify for the most favorable rate.

If you have a bad credit history, you may need to wait on buying a home, and spend some time improving your credit profile, but then again you may not have to wait. The mortgage experts at Cruise & Company can help you create a plan for homeownership. In any case, you should bring your payments up to date and consistently pay your bills on time. It might even be looked on favorably by the loan underwriter if you pay off some debts.

You need an acceptable credit history before you purchase a home because anyone who gives you a mortgage loan needs to know that you can be trusted to pay it back.

3. Do you have the money for a down payment and closing costs? Homeowners make a large initial investment before monthly payments even begin. You will need a down payment of about 3-5% of the purchase price of your home, and you can expect closing costs to total about another 3-6% of the price of the house. So, if you want to buy a $120,000 house, you'll have to have about $10,000 up front. There are some government-sponsored loan programs that require little or no down payment for qualified borrowers. You might apply for a Veterans Administration (VA) loan or a Federal Housing Administration (FHA) loan. VA loans are, obviously, limited to a certain group, while FHA loans, which have a loan limit of about $110,000 here in the Piedmont Triad, are available even to millionaires. If you have the necessary funds, you are well on your way to owning your own home. Saving for these initial costs is often the biggest obstacle to home ownership. However, if you do not yet have this money, and no rich relative wants to give it to you, you'll probably have to wait and save before you can purchase a home.

4. Can you afford mortgage payments? If you can get a mortgage loan and have money for the down payment and closing costs, this is the only question that remains. But, really, the question is one of how much you can afford. And how much you can afford to put down on a house, combined with how much you can afford in monthly mortgage payments, will determine your price range. Then you have to decide if you want to buy what you are able to buy. If so, start looking! If not, you'll have to either lower your standards and settle for a less expensive house or neighborhood or keep renting while you save up or wait for a raise.

We’ve got a free handy calculator here at Cruise & Company that we’ll be glad to send you if you call 993.3040 and request it. You can use this calculator to determine how much you can spend on a house.