Buying a Home? These Questions Will Let You Know If You Are Ready
Who doesn’t dream of owning your own home? For many people, owning a house is a major financial goal. Fortunately, our government has given initiatives to help many people achieve this goal. But as good as it is to have your own home; it may not be for everyone.
Buying a home has many benefits indeed, but there are many tradeoffs as well. Is buying a home for you? How do you know when you are ready to buy a home? Here are 5 questions that will help you decide whether you are ready for homeownership.
1. Are you financially ready?
If you are struggling to make both ends meet, you may want to hold off buying a home. Buying a home is not a good idea if you have debts you are struggling to pay, the costs of homeownership will only compound your money woes. There are more costs to pay in addition to mortgage payments when you own a home – utilities, maintenance, repairs and renovations, HOA fee, insurance, and taxes.
2. Are you planning to stay for a while?
If you buy a home and sell it within two years or less, you might not be able to get back the costs you paid to buy the house. It is ideal to buy a home if you are planning to stay on your home for at least three to five years or longer. You may be better off renting if you will be switching jobs and location.
3. Have you saved for a down payment?
Have you saved enough money for a down payment? Saving for a down payment can be a challenge for some, good thing not all mortgage loans require a down payment like VA and USDA loan and other mortgage type that require at least 3.5% (FHA loan), but if you want to save money and get the best interest rate, it is ideal to put down 20 percent (Conventional loan). Also don’t forget to consider other upfront costs of buying a home like closing costs, taxes, insurance, and moving costs.
4. Can you make that monthly mortgage payment?
Your monthly mortgage payment is your repayment of the loan, including the interest. If you buy a house this will be added to other expenses you will have to pay on top of your other expenses and debts. If you have more room on your budget, that’s good. But if that’s not the case, you may want to reconsider buying a home until you have enough income to shoulder all expenses. When you own a home, mortgage payment won’t be the only costs you’ll have to pay, which leads to our next question.
5. Can you handle the additional cost of homeownership?
Can you handle other home associated expenses like HOA and taxes and other ongoing costs like home maintenance or repair? Repairing or renovating can add hundreds of dollars to your monthly expense. Sure, it’s a problem you will not have to face when you buy your home, but you will never know when the need will present itself so you’ll have to make sure you have budget set for this.
Did you answer yes to all these questions? If yes, you are ready! Work closely with your real estate agent so you can make the best buying decision for your needs. If no, that’s fine. Buying a home may not be the right time for you yet, just continue to work hard until you reach your goal.
Buying a home is one of the largest financial transactions you will make in your life, and it also comes with responsibilities. It’s best to know what to expect once you decide to make your goal a reality. Owning a home can be an avenue for building wealth but it can also be a ticket into financial despair. Ultimately the decision is in your hands whether to buy a home or not. By going through the questions listed above and consulting with your tax professional or people you trust, you should be able to make a sound financial decision.