5 Signs You're Ready to Buy a Home
Have you been biting your nails and thinking hard about whether you're ready to buy a home? Your first home purchase is a big step. If you're thinking of moving off the fence and shopping for a home, here's how you know that you're ready.
1. You Know What You Need
When you're looking for your first home, you probably have a long list of dreams and desires. However, have you considered what elements of that list are critical and non-negotiable? For instance, if you have a large family you could have an absolute minimum number of bedrooms. If you have a family member with mobility challenges, a ranch-style home could be the best choice.
Having clarity about your absolutes will help your real estate agent set you up for success so that you look at homes that are primarily in your areas of interest.
2. You've Settled on an Area
While it can be helpful to be geographically flexible just in case the perfect home is a little bit outside the neighborhoods that you've targeted, it's also helpful to know what neighborhoods you love. You could enjoy their culture, their amenities such as schools, and their proximity to transit. Whatever your reason, you'll need to have a few potential places in mind for your future home so that you can easily narrow the search.
3. You Have a Substantial Downpayment
While you can buy a home for a small downpayment of as little as 3.5 percent, that doesn't mean that you should do it. There will be a lot of extra costs when you buy the home, so you need to account for those. You also need to consider the fact that a smaller down payment leads to larger monthly payments. CNN also notes that "anything less than 20% means paying private mortgage insurance (PMI), which will increase your monthly payment."
4. You Can Afford the Payments
Most people who buy a home get a mortgage. Can you actually afford that mortgage? While the bank won't let you get a mortgage that's wildly outside your budget, you should think about the following as well:
- Are you planning to have a family? If so, can you afford that mortgage when you add in a stay at home parent or daycare costs?
- Are you considering other major life changes, such as a long trip or a change in career?
- Can you afford the mortgage if interest rates rise?
- Do you have a contingency plan for illness or job loss?
All of these factors can impact your ability to afford a mortgage. If you want to own your home for the long term, make sure you can afford it.
5. You Are Financially Prepared
When you buy a home, things break. You're the one who is responsible for fixing them. Are you ready for all of those unexpected expenses? While you don't need to be financially perfect to buy a home, you do need to be ready to stay out of as much debt as possible. According to Money Under 30, "if you are forced to use a credit card because there always seems to be more month than money, do not buy a home."
Before you buy a home, make sure that other debt such as auto loans and student loans feels under control. If your debt is increasing rapidly, getting into more debt such as a mortgage and then adding unexpected home expenses on top of that could be a recipe for disaster.
6. You're Mentally Prepared
Homeownership brings responsibility. According to CNN, "when something breaks in your rental unit, it's a quick call to the landlord to get it fixed. Homeowners are on the hook for both making and financing any repairs." Are you ready to take on the extra responsibilities of home management to ensure that your home is functional and beautiful, both now and in the future?
At Open for Homes, we want to make sure that you know everything that you need to know when you're ready to buy a home. Take a look at the blog at Open For Homes to get more information about home purchases, whether it's your first purchase or you're a seasoned homeowner.