Have you thought about buying a home for a while now, but can’t decide if the right time has finally come? It’s one of the most expensive purchases you’ll likely ever make, and while it can be an exciting time, it’s also important to make sure you’re ready for such a big step. Otherwise, you might be better off waiting, and just sticking to renting for the time being.
The following are some signs that you may be ready for homeownership:
You’re financially prepared
It’s difficult nowadays to get approved for a home loan without a down payment; traditional mortgages usually require at least 10 percent down. On top of the down payment, there are also closing costs to consider, which you’ll have to also pay upfront if you’re not rolling them into your mortgage. Closing costs can be as much as 5 percent of the home’s final sale price.
Having the money for your down payment and closing costs may mean you’re ready for homeownership, but not if it means completely emptying your savings account to do so. Being financially prepared for homeownership means having the funds necessary to purchase your home, while also keeping your emergency fund intact. Ideally, you’ll want to have enough money saved up that can take care of your expenses for at least three to six months in case something unexpected comes up, such as an accident or illness. If you won’t have any type of emergency fund after buying your home, it may not be the right time yet.
You’ve responsibly set a budget
Some first time homebuyers end up losing their homes because they don’t realize how much money goes into their monthly payments, aside from the actual mortgage itself. It can be easy to overlook other expenses, such as insurance and maintenance. They might take on a home loan with monthly payments that are too high to handle, although they may have seemed realistic in the beginning. If you’re stretching every last dollar to make a mortgage payment affordable, then you’ll need to lower your housing budget and take on something that you can comfortably fit into your finances. If you’re unwilling to settle for anything less than the perfect home, you may not be ready yet for homeownership.
You feel secure at your job
Job security is important when you’re about to purchase a home. Of course, there are never any guarantees and no matter how secure you feel your job is, you’ll always want to be prepared financially in case anything ever changes. But if you’ve just started a new job, or suspect that there might be some changes happening at your company soon, you may want to wait on buying a home.
Your credit has improved
Credit is important when you’re about to buy a home. If you have money for your down payment and steady employment, you may be able to get approved without a flawless credit record. However, if your score is downright poor, you’ll probably need to work on it before applying for your mortgage. If you’ve worked at taking care of overdue debts and you’ve noticed an improvement in your credit score, it may be a good time in your life to make a move on buying a home.
You don’t have plans to move anytime soon
If you just moved to a new city and you’re not sure if you’re going to stick around, you might want to rent a place for a while until you decide. Or if you’ve lived in the same town your entire life and you’re not sure how much longer you’ll be there, it may not be the right time in your life to purchase a home. Ideally, you’ll want to buy a home when you know you don’t plan on moving for at least five to seven years, but even longer is better. If you have any doubts, you may want to hold off on homeownership, as reselling or renting out your home may not happen as quickly or easily as you may need it to.