How do you know if you’re financially ready to buy your own home? Here are two factors to consider before you go hunting for your dream abode:

Find out what your debt ratio is. Debt ratio is calculated by first finding the sum of all your income before taxes. Next, find the sum of all your household debt. This includes car loans, student loans, and any other loans or debt obligations that you have. When you have your two sums, divide your total debt by your total income. For example:

Gross monthly income = $10,000
Loans= $2,000

$2,000/$10,000 = .2 or 20%

This debt ration will help the lender to assess if you are credit worthy or not. Usually, anything less than 36% will get favorable mortgage.

Another factor to consider is if you can afford to hand over the down payment. The most common amount is 20% of the purchase price plus 5% closing cost.

All of these might be a spirit dampener, but remember that your excitement in owning your dream home will die a short death once reality bites and you start paying what you can’t afford in the first place.