As proof of your income, lenders will request your most recent tax returns or payslips. Bank accounts must also show money deposited in them if you will use it for a down payment. Having the money to finance a loan shows them you have the means to do so.

You may have a harder time getting a loan if you're a self-employed person without a steady paycheck. Documentation is crucial in this case. Make sure you have collected two years' worth of bank statements, your income tax returns and other documentation that the lender can use to verify your income.

2. Is it your intention to live in the same area long-term?

If you were to buy, would you consider living in that area for five years or more? Do you want to start a family? Are you growing old?

Think about this: Can I see myself living in this place, in this location? How long will my job be in this geographic area in the next two, three, four years?”

You make a big investment when you buy a home. Determine if you can afford to buy a home if you are only planning to live there for a few years.

3. Are you comfortable managing debt?

People who have a demonstrated history of being able to manage their debt are more likely to get more favorable terms on a home loan.

Paying your monthly debts on time and using your available credit wisely will lead to a higher credit score. The higher your score the less risky you appear to a lender, which in turn will qualify you for a lower interest rate.

According to CIBIL, a credit score of 720 and above is considered good, a score of 640 and below is considered poor.

4. Do you have an emergency fund?

A fund for emergencies can tide you over in case of unemployment or help tackle unexpected expenses. According to most experts, homeowners should save enough cash to last from three to six months.

Buying older homes, which may need renovations, requires maintenance and repairs. A house you can buy but not afford to repair will only worsen your financial situation.

In contrast, moving into a brand new structure won't require repairs and maintenance. You can save money by doing this.

5. Do you have sufficient cash to pay a down payment?

You are likely to make the largest investment of your life with your down payment for your first home. Purchasing a home doesn't only mean you have to pay only for the down payment, but there are also many unforeseen expenses to contend with.

Nothing is worse than purchasing the home of your dreams and not having the funds to do it up. Your walls may stay plain white for a longer period of time than you'd like. As long as you are able to put down a deposit that allows you to breathe and upgrade after the purchase, you are on the right path to home ownership.

We hope this article provided you with valuable information to determine whether you are ready to move forward with your dream of owning your own home.