9 Ways To Tell If You Are Ready To Buy A Home – Buying a home is a very exciting step. With many family and friends around you buying their first homes, it can seem that you should be doing the same. Yet a new home comes with new responsibilities and it is important to consider if you are ready. Take a look at these tips to find out if you really are ready to buy a house!
- Do you have a reliable source of income? Buying a home is expensive, as is the upkeep and payments afterward. It is important to have a reliable and steady source of income so you can plan ahead.
- Do you know where your money goes? Know where your money is coming from and where it goes afterward. How much goes toward monthly bills? Groceries? Extra shopping? Knowing this in advance will help you save and budget for a new home.
- Do you have emergency savings? While you may really want a home of your own, don’t spend every dime you have on it. Have emergency funds saved up to cover 3-6 months of living expenses
- Do you have a budget? Have a budget set before you begin your search. This will make it easier to determine your price range for your future home.
- Have you saved for a good down payment? You should have money saved for a sizable down payment on your home. Generally this is about 20%. Much less can greatly increase the monthly payments.
- Do you have any big future expenses? The amount of extra money you have is going to decrease with a new home. If you have any big expenses coming up you may want to hold off. A new home on top of a baby on the way, paying tuition, or any other big expenses can be very stressful.
- How big are your outstanding debts? Generally speaking, the banks want to make sure your monthly housing costs — including principal, interest, taxes and insurance — will consume no more than 33% of your monthly gross income; and that your total debt payments, including your mortgage, credit cards, student loans and auto loans, will remain below 38% of your total pay. If you have large outstanding debt or have recently taken out a loan this could impede a good mortgage rate. You may want to pay off some of the debt before purchasing a home.
- Can you make a long term commitment? Are you ready and willing to stick around for 3-5 years? This is normally how long you must stay in your home in order to recoup your buying and selling costs. Any sooner could cause you to lose money in the home.
- Are you ready for the homeowner lifestyle? You will now be responsible for home repairs and improvements. From leaky faucets and mowing the lawn to other home maintenance it will now all be on you. Don’t worry, this also means setting your home up just how you like it and designing it as well! But it is still a big change in lifestyle from renting!