Buying a home is one of the biggest financial decisions you'll make. Before you look at properties and dream about a custom kitchen or outdoor living space, ask yourself if you're ready for homeownership. The answers to the following questions can help you decide.
Are your finances in order?
Consider your financial situation before taking on a mortgage. Review what you owe, including loans and credit card debt. If you pay your bills on time and have money left over for savings, you may be in a good position to buy a home.
How motivated are you?
Saving for a down payment is hard and may take some sacrifice. If you adjust your budget or make lifestyle changes to save money, you're likely a motivated buyer.
There are more tell-tale signs you're eager to buy a home:
- You think about it day and night
- Falling mortgage rates excite you
- You get the latest real estate trends in your newsfeed
- Your conversations weave their way to real estate or home decor
Are you a good saver?
Good savings habits help you raise your down paymentOpens a popup. faster. Create a budget and make saving a priority. Try to put away 15% or more of your income. If you save 10% or less of your pay, look for ways to reduce expenses. Review where you spend money and find more cost-effective options.
What's your down payment?
The size of your down payment determines the amount of mortgage you need. A larger down payment means you can buy a more expensive home, or need to borrow less money. Your down payment could be as little as 5% of the property value, depending on where you live. But anything less than a 20% down payment comes with extra costs, including mortgage default insurance.Opens a popup.
Don’t forget to budget for additional costs when buying a home.
What's your budget?
If your rent is close to a monthly mortgage payment, take another look at your budget. Homeownership comes with a list of other financial obligations, including property taxes, municipal fees, insurance, additional utility expenses and ongoing routine and large-scale maintenance. It's also smart to put a little extra away for emergencies.
Plan for move-in costs — and not just for the moving truck or to transfer your cable, Internet and other bills. Every new home comes with small repairs, minor upgrades and aesthetic improvements, such as paint, window coverings, hardware or light fixtures. It’s great to own a home, but you may also want to tackle the dated tile in the bathroom or the faded paint on the walls as soon as possible.
Are you ready to settle down?
Homeownership comes with a longer-term commitment, while renting offers flexibility. If your work and family situations are stable, it may be the right time to buy a home.
Be honest with yourself
Take a look at your current situation and do a self-assessment. You'll know if you're ready to start the journey to homeownership.
