The thought of purchasing a home is sure to evoke a variety of emotions and plenty of questions. After all, owning a place of your own represents a big step into greater maturity. So, how do you know if you are ready to buy a house?
Are your finances in order?
Looking at the state of your current finances remains key in determining home purchase readiness. After all, this is a numbers game and you need the figures to play successfully. Looking honestly at the following areas of your budget paints a realistic picture:
— Current credit card debt
— Outstanding auto, student or personal loans
— Ability to manage your current bills
— The state of your credit score
Have you saved a down payment?
While a down payment of 3.5 percent seems doable at first glance, remember that on a $200,000 property the calculation adds up to $7,000. Plus, the hidden expenses of closing costs, taxes and insurance add quickly to the dollar amount required.
Can you afford the monthly payment?
You might compare a predicted housing payment to your rent payment and think, “I can manage that.” But, cautiously do a bit more checking before taking the leap into homeownership. The following costs add to your monthly payment:
— Home Insurance
— Property taxes
— Utilities, including water, sewer and gas
— Possible homeowners (HOA) fees
— Potential city assessments
How will you update or furnish the house?
Other easily forgotten expenses creep into the mix. For instance, consider the buffer needed for updates or repairs before you move into your new home. And, while not all surprise fixes can be anticipated, leaving a few dollars in your account for future repairs proves wise.
What is the current state of the market?
Knowing what is happening in the local housing market makes sense. Finding affordable housing at low-interest rates improves your chances of successful homeownership. The question that should weigh into your decision: “Is the market in a good place for me to make a wise investment?”
Do you have future plans?
Your readiness to buy also links closely with your readiness to settle down. Purchasing a home is a long-term investment (unless you are a professional flipper). Reflect on the following points:
— Your job change history
— Current job security
— Your predicted longevity at work
— Social and familial connections
— Which is stronger: the pull to wander or develop roots
While this process may seem daunting, this proves to be an exciting time in your life. With a bit of mental and financial soul searching, you can wisely determine your home purchase readiness. After all, the goal is to answering the question “Am I ready to buy a house” with a resounding “Yes!”
Have questions about homeownership and the mortgage process? Give me a call, I’d love to connect with you.