Have you ever wondered whether it would be worth while to ditch your landlord and purchase your first home? Does the question “Am I ready to purchase a home?” keep you awake at night? First of all, you’re not alone. Renting is costly and at the end of the day, the place that you’re currently living in is not yours. Most people prefer paying off a mortgage over time and having a place to call their own over renting a house or apartment. Not to mention, buying a house in our current market usually results in rapid equity which makes for a great investment. But are you in a position to buy a home? And if you are, should you?
Before making a decision, there are some questions that you should ask yourself like:
1. Have I saved up enough money for a down payment?
Most lenders recommend putting down as close to 20% as possible. So, if your budget is a $500,000.00 home, that would be $100,000.00.
2. How much debt do I have?
This may include credit card debt, student loans, auto loans and/or personal loans. Lenders look at your debt to income ratio to determine whether or not they feel comfortable issuing you a home loan. So, if you have a lot of debt, it would be smart to pay it down as much as possible before shopping for a home.
3. Have I been pre-approved for a home loan?
Before shopping for a home, most Real Estate Brokers will ask you whether or not you’ve been preapproved for a home loan. Why? We want to make sure that you know exactly how much house you can afford, and that when you go to make an offer on a home, there will be no contingencies regarding financing so that your offer is more likely to be accepted.
4. Do I have a steady job?
Having a steady job is important for a couple of reasons. First, having a steady job is necessary to pay your monthly mortgage and other bills. Secondly, lenders look at how long you’ve been at your current job when deciding whether or not to approve you for a home loan.
5. Can I afford the monthly costs associated with home ownership?
When most people think of home ownership costs, they think of the principle and interest on a mortgage. But what about HOA dues, property taxes, homeowner’s insurance, water, sewage and garbage and city assessments? Not to mention, home maintenance costs, which brings me to my next question…
6. Am I prepared for hidden home maintenance costs?
Can you fix a broken water heater or afford to pay someone else to do it for you? What if the roof needs to be replaced? Are you prepared to pay someone to replace it? When you’re a renter, you have the ability to call your landlord when something goes wrong. That’s not the case when you’re a homeowner.
7. Do I plan on staying in the same place for at least the next 5-10 years?
Have you fallen in love with a specific area enough to settle down there for at least 5-10 years? Buying a home is a big, long term investment. And unless you flip houses, the average home appreciates between 3-5% each year. Meaning, you won’t have a lot of equity in your home if you sell before the 5-year mark.
As I mentioned above, buying a home is a huge investment and should not be taken lightly. Being an honest and attentive Real Estate Broker, I want to make sure that my clients are 100% percent prepared before investing in their first home. Therefore, being upfront about all of the ins and outs of homeownership and the associated costs is important to me.
I hope this article helped you to determine whether or not you’re prepared to buy your first home. The quiz shown below is an excellent tool that you can use to get a recommendation on whether or not you’re ready for home ownership. Your results are determined based upon your answers to a few relevant, key questions.