June is National Home Ownership Month, and by some happy coincidence, it turns out that mortgage rates are at their lowest point since early 2013. So have you been considering purchasing your first home? It’s not a decision to take lightly, but thankfully there are a few early signs that can help you determine if you’re ready to become a homeowner.
You’re pretty well settled
Buying a house doesn’t mean you have to live in it forever. In fact, as of 2014, the average homeowner stayed in their home about nine years. But considering all the fees associated with purchasing a home (and then actually moving into it), it’s financially prudent to be able to stay in that location for at least four to five years.
That means knowing where you want to be and feeling confident that your situation won’t change dramatically in the near future.
Your income feels secure
No income is truly guaranteed and unexpected things can happen at any time, but a stable, steady income certainly makes it easier to obtain a mortgage and make your required payments on time. Many mortgage lenders may even require evidence that you’ve been working steadily for two or more years.
Also, while many programs exist to help homeowners rehabilitate delinquent loans, you really don’t want to fall behind on your house payments and risk foreclosure. An established, steady income will help ensure you’re always able to make your payments.
You’ve got money saved
It is much, much easier to find a mortgage with good terms (and no additional mortgage insurance) if you have money set aside for a down payment. How much you need available really depends on the cost of homes in your market. Ideally, you’d like to have 20 percent saved up for a down payment, but the more you can comfortably put down, the better.
You’ve got a clear picture of what you can afford
Saving money for a down payment and having a steady source of income are only part of the bigger financial picture. How much house can you actually afford? It isn’t simply a question of how large a monthly mortgage payment your budget can support. Home ownership comes with its own unique set of recurring fees and expenses, many of which will only increase as your house gets older. Don’t be caught off guard – understand all of the costs before you sign on the dotted line.
You’re ready for the responsibility
Finally, one of the key differences between being a renter and an owner is that the buck always stops with you (unless there’s a homeowners association). You’ll need to manage any and all problems that arise – either by yourself, or by hiring someone else to handle the job. Are you ready to take full responsibility for all the little leaks, drafts, flickers, creaks, and cracks that are bound to appear over the years? Then if so, you may just be ready to purchase your first home. Good luck!