Will 2022 Be the Year You Get on the Path to Homeownership?

It takes time to get ready to buy a home, but this could be your year.

Becoming a homeowner is a major life milestone, but it's one you need to make sure you're ready for. If you're hoping to buy a home soon, here are a few key signs you'll be able to make 2022 the year you get on the path toward owning a property of your own.

1. Your credit score is good -- or you're working on improving it

Most conventional lenders will not provide you with a home loan if your credit score is below 620. And with a score below around 700, you're probably not going to get the most competitive interest rates. Since a mortgage is a large debt and a high interest rate can make your home loan quite expensive, you may not want to borrow to purchase a property until you've done as much as possible to improve your credit score.

If your score is pretty good right now, or if you're working on boosting it and expect it to be above 700 by the end of the year, then 2022 may be the right time to buy a home.

2. Your job is stable and you have plenty of income

If you're aiming to get a mortgage, most lenders want to make sure your total debt payments (including new mortgage costs) will not exceed 36% of your income. And not all your income necessarily counts.

If you've job hopped a lot and haven't been with your company and earning your current salary for a few years, you may not get credit for any or all of what you earn since lenders won't find the income reliable.

While it's possible to get some loans with a higher debt-to-income ratio, you'll have a narrower choice of lenders and loans may be costlier. Of course, an unstable job can also put you at risk of being foreclosed on, as well as getting a loan that's more expensive than it should be.

If you have a steady job with reliable income, and plenty of it to easily fulfill most lenders' debt-to-income requirements, then it may be time to call a realtor in 2022.

3. You have ample money in the bank to cover key costs

Buying a home comes with substantial upfront expenses. This includes closing costs, which could equal 2% to 5% of the borrowed amount. Moving expenses can also add up to thousands of dollars.

Borrowing for these upfront expenses can raise total costs and create complexity. For example, mortgage lenders may not be willing to give you an affordable home loan if you've charged thousands of dollars on your credit cards for movers. And rolling your closing costs into your mortgage loan can make it harder to qualify to buy the home and can add a lot of additional interest over time.

You'll want to make sure you are financially prepared to pay these upfront expenses so you don't end up with a more expensive mortgage. If you have the money ready, then that's a good sign you should start looking for a house this year.

4. You're fairly certain of your future plans

Finally, you'll want to make sure you have a good idea of where you'll be in 2024 or 2025 before buying a home in 2022. That's because you'll need to hang onto your property for several years in order to maximize the chances of breaking even (or making a profit) on the sale. And you'll need to own and use the home for at least two years to reduce or avoid paying capital gains taxes on the profits.

You don't want to rush into homeownership, so make sure you address all four of these issues to decide whether it makes sense for you to toast to the end of 2022 in your very own new home.