You have been renting an apartment ever since you graduated college. Several of your friends keep telling you that their monthly mortgage for the home that they own is less than your monthly rent. “You should buy a home,” one of your friends told you. “You’re throwing money away. You should be thinking about making an investment that could result in a big profit and increasing your financial assets.”
Your friends might be right, but they might be wrong. Do they know what your career and life plans are? Do they have detailed knowledge about your financial situation? Do they know whether you have the skills and the desire to maintain a nice home?
No one knows you better than you. Before you seek to become a homeowner, you should evaluate whether you are ready for such an important step in your life. Here are five important signs that you are ready.
1. You Have Found The Right City:
Buying a house when you’re ascending the corporate ladder at work and you’re eager to move to another locale if there’s a better job opportunity there can be a horrible mistake. Your house, in fact, can be an obstacle to you hitting the ground running in your new job and city.
But what if you have decided that the metropolitan area that you live in is the one that you want to live in for a long time? Perhaps, you love your job and expect to hold it for several years. Perhaps, you have a spouse who also loves his or her job. Perhaps, you have children and the city you live in has an excellent school system. Having a settled life is a sign you’re ready to be a homeowner.
2. Your Income Is Stable And High:
Lifelong job security is no longer realistic in this day and age, but you know when your situation at work is stable for at least the foreseeable future and when you have the job skills necessary to earn a high salary for a long time even if you leave your current job. If you’re self-employed, you need to be confident that you will have a stable roster of high-paying clients for several years (ex.–lots of patients if you’re a doctor).
The Business Insider article “7 signs you aren’t ready to buy a home” points out that most homebuyers have a 15-year or 30-year mortgage. Consequently, most homebuyers need to have an income high enough to make a monthly payment for 15 or 30 years.
3. You Have Saved A Lot Of Money:
Buying a house without paying a large down payment is possible, but is it wise? It isn’t. The Business Insider article points out that you should make a down payment of at least 20 percent of the purchase price if you want to avoid having to pay for private mortgage insurance.
You want to have enough savings to afford a significant down payment and still have enough money in your bank account for other anticipated and unanticipated future expenses. Spending all your savings on a house while ignoring, for example, your educational needs or your children’s educational needs is just foolish.
4. You’re Ready To Maintain A Home:
Being ready to maintain a home includes being able to afford to maintain a home AND being prepared knowledge-wise to maintain a home. As a renter, you have probably encountered a wide range of maintenance problems, but you should know those problems pale in comparison to what you will face as a homeowner.
Pull out a pen and a piece of paper and jot down all the potential maintenance problems and responsibilities. Keep jotting. A partial list includes electrical problems, plumbing problems, landscaping responsibilities, fixing problems in your yard such as overgrown bushes and trees, exterminating pests, painting, washing windows, fixing windows, fixing this and that…and the list goes on. You ought to also be prepared emotionally for dealing with a wide range of new problems. If you are, that’s definitely a sign you’re ready to be a homeowner.
5. You Know Your Credit Is Good:
And “knowing” means more than assuming your credit is good because you keep getting offers from credit card companies, you have always paid your credit card bills on time, and you passed previous credit checks with flying colors.
The real sign credit-wise that you are ready for homeownership is when a mortgage professional tells you that you have been preapproved for a loan to buy a house BEFORE you have actually selected a house. In addition, you should make sure you don’t have too much debt before taking on another loan and you should examine your credit reports. You can obtain your credit reports for free and should make sure you correct any errors before applying for a mortgage.