Five Signs You're Ready to Buy Your First House
June is National Homeownership Month and, as it turns out, mortgage rates are under 3% - though they may not stay that way for much longer.
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’ve got enough money for a down payment
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. Ideally, you’d like to have 20 percent saved up for a down payment, but the more you can comfortably put down, the better.
The problem, unfortunately, is that while mortgage rates are low, housing prices are the highest they've ever been. So even if you have money set aside, it may not be enough. Even if prices are high, it's a good idea to start shopping around, particularly in the event that prices start coming down.
Your income is 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. 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.
If you're between jobs or recently made a career change, you may want to wait before starting the house hunting process.
You can afford the many costs of homeownership
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. Homeownership 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.
To get up to speed on the many costs of homeownership (and how to prepare) you may want to take an online homebuyer course.
You’re not going anywhere
Buying a house doesn’t mean you have to live in it forever. You will, however, probably be there for awhile. In fact, the length of time homeowners are staying in one house has been on the rise, up to an average of 13 years, as of 2018.
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.
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? That doesn't mean you need to become an amateur plumber or a landscaper (unless you want to!), but that you need to do the work (and handle the costs) of bringing in the right professionals at the right time. And in the meantime, being sure to handle the small, daily maintenance that will keep your house in-tact.
Then you're ready for those unique responsibilities, you may just be ready to purchase your first home. Good luck!
For more first-time homebuyer advice, check out our Ultimate Guide to Preparing for Homeownership.