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How to know when you're ready to buy a home

Interest rates

Wilder says a good lender can talk to buyers about a variety of mortgage scenarios based on loan qualifications and size of down payment.

"A lender should also talk to you about the impact of rising interest rates so you understand how much you can afford at different rates," Wilder says. "Buyers need to buy within their comfort level, so they may need to compromise on the home they buy. If they decide to wait to save more, they need to realize that if interest rates go up they may not be able to qualify for the same mortgage amount as they can right now."

Qualifications

A credit score of 720 to 740 is generally required to qualify for the lowest mortgage rates. FHA loan requirements are more lenient and sometimes lenders qualify borrowers with a score as low as 620 for these government-insured loans.

"We generally look for a stable two-year job history, but we know people have lost jobs in the past few years so we are looking for a re-established job history if someone has been unemployed," Walton says.

Home prices and rental rates

Schindler says potential buyers should research their housing market to determine whether owning is more affordable than renting or the other way around. In some markets, demand drives up rents, while a glut of homes for sale drives down prices.

"A rent-versus-own calculator can be a good resource, but generally these will show you the maximum mortgage you qualify for at the best rates," says Walton. "Determining how much you want to spend on rent or a mortgage should be a personal decision."

Responsibilities of homeowners

"Buyers need to make sure and factor in the maintenance costs of homeownership, which can run from 1 (percent) to 4 percent of the home value per year," Schindler says. "They need to realize that housing costs also include homeowners insurance, perhaps flood insurance and homeowner association dues, not just the principal and interest on the mortgage payment."

Ready to buy?

"If you are a good, solid buyer financially, with savings, a steady income and job stability, and you can commit to staying in a home for the long-term, then the only thing to think about is whether you want to own a place to call home," Wilder says. "If all those pieces are in place, then it makes sense to buy now."

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Mortgage Overnight Averages
Product Rate +/- Last week
30 yr fixed mtg
3.73% 3.65%
15 yr fixed mtg
2.85% 2.79%
5/1 ARM
2.60% 2.59%
30 yr fixed mtg refi
3.72% 3.64%
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