You’ve got the stable job and you feel like you are ready to head out on your own. Renting doesn’t do it for you and you think you are ready to buy a house, but are you really ready? There are a few questions first-time homebuyers need to ask themselves to find out if they are truly ready to buy that first house.
Do I have a good down payment?
To purchase a home here, you need 3-5% of the purchase price right up front, but having up to 20% is much more desirable. Ask yourself if waiting another year to sock away more of a down payment is a good idea. If you live somewhere where your rent is low (like with your parents), staying put and saving more is definitely a great idea. Don’t forget about closing costs either, as those little costs add up quickly and you will need them before taking possession of the house outside of your down payment.
Where do you want to be in five years?
Buying a home is never a decision to take lightly but if you think your life could be drastically different in five years, you might want to take a step back from buying a home. If you plan to travel or go back to school, decide if having a mortgage will be something that will help or hinder you in the long run. If you are single, think about the fact that you could have a family five years from now.
Can you get financing?
Take a look at your credit rating and the credit you do have. If you have a sketchy credit history and owe thousands on your credit cards, lenders may not even look at you. Ask yourself if you would be better off paying off your existing debt before adding hundreds of thousands more to your debt load. As well, lenders will also look at the stability of your job and how long you have been there. If you just got hired last week, maybe waiting until you know the job is something you’ll keep would be a good idea.
What is the market like?
If the market is super hot and a seller’s paradise, now might not be the best time to step into home ownership. You don’t want to overpay for a house and then have the value come down, as is what happened when the market crashed or the “bubble burst”. Your home could be an investment, but if the market is too hot, your investment won’t make much in its first few years. If you plan to stay for the long-term and ride out the waves, you may be okay.
Buying a house is a decision that first-time homebuyers shouldn’t take lightly, so ask yourself those four questions to ensure you are ready. If you need more help deciding, feel free to contact me!