You’re Ready to Buy a Home
Buying a house is one of the largest financial decisions of your life; but how do you know when you’re ready to buy a home?
No doubt, there are plenty of good reasons to own the roof over your head, both emotional and financial. But there are many trade-offs as well. With the added control comes a laundry list of responsibilities. With the stability of staying put comes a loss of flexibility. And with the opportunity to build equity comes the risk of losing money.
These are the seven questions that will determine when you should venture into home ownership. It’s not about an age you need to reach first. It’s about a person you need to become before buying a home.
1) Is my financial house in order?
If you’re already struggling to pay your bills, buying a home will only compound your money woes.
It is not that you cannot have any debt in order to buy a home, but having debt is the symptom of a greater sickness. That debt is a symptom of a greater problem: not enough money. If you are force to use a credit card because there seems to always be more month than money, do not buy a house.
2) Are You Ready to Settle Down?
The old rule of thumb was that buying made sense if you planned to stay put for at least three to five years. These days, many financial planners are recommending an even longer window.
As important as the numbers, is whether you’re ready to tie yourself down to a particular home in a particular city.
3) Have You Saved Enough for A Down Payment?
Your down payment on your first home will most likely be the single largest investment you’ve ever made. Don’t forget the closing costs, insurance, taxes, and money for repairs and furnishings to turn the house to a livable home. These costs will easily add thousands of dollars to your bottom line.
4) What is the after-tax cost of owning?
If you’re on solid financial ground and ready to make a longer-term commitment, the next step is to get a realistic estimate of what you can expect to spend, and how that breaks down monthly.
5) Can You Really Afford the Payment?
There are many additional costs of homeownership that unseasoned buyers tend to overlook. Four out of five buyers of new homes, including units and townhouses, can expect to pay homeowner association fees.
6) Can You Fix a Leak?
When you become a home owner, you have to be able to fix your own problems. It’s perhaps the biggest difference from being a renter.
7) What’s happening in my market?
Economists may talk about real estate in national terms, but the market varies greatly from one city to the next, even from one neighbourhood to the next.
Therein lies one big benefit of owning the roof over your head: Assuming you plan to stay put for a while and lock in a fixed-rate mortgage, your costs should remain relatively stable from year to year; in time, they’ll actually go down. For many buyers, that’s all the reason they need to get off the fence and into the housing market.
So, Are You Ready to Buy?…