ad – this is a collaborative post / Buying your first home is one of the most important decisions you’ll ever make in your life. Not only is it the biggest financial purchase you’ll make in your life, but your home will also shape your future as you settle down and start a family. However, with such high stakes, you need to make sure that you’re making the correct decision when you purchase your home.
Buying a home is a long-term commitment, so you have to be absolutely sure you’re ready to make the purchase. You may be wondering, “Should I rent or buy a house?” and not know the answer to the question. Thankfully, there are some criteria that you can check to ensure that you are completely ready to buy a home and avoid a disastrous long-term commitment.
There are also plenty of tools available to help you on your journey. It’s not as easy as just picking a house and away you go! You might want to consider using a Mortgage Calculator to help you manage the financial side of buying a home. You can even estimate your mortgage based on income.
So how can you know you’re absolutely ready to purchase a home? Let’s take a look.
The first thing you should check when deciding whether or not you should buy a home is whether you are debt-free. With a home purchase comes mortgage payments, a monthly expense that will likely eat up a good portion of your income. If you’re still paying off other debt like credit cards and student loans, then mortgage payments could be tough to make, and you may not have enough disposable income to save or live the life you want.
While being completely debt-free is ideal when buying a home, for many people, that is unreasonable. However, your debt should be in an extremely manageable place if you’re seriously thinking of buying a home. Try to consolidate and refinance student loans to make it easier for you. Buying a home when you have thousands of dollars in debt already is a disaster waiting to happen.
Another key indicator of whether or not you’re ready to buy a home is the amount of money you have saved up. While you may think that a mortgage allows you to pay off your home over time, you still have the down payment to worry about. It is usually recommended that you pay at least 20% of the list price in the down payment, meaning you’ll still have to shell out a lot of money upfront. Even if you buy a home listed at $200,000, you’re still going to have to put $40,000 down as an upfront payment.
These costs don’t even factor in closing costs and other expenses that will likely cost you a few thousand more. In addition, you don’t want to exhaust all of your savings funds on your home, as you always want to have a little leftover in case of an emergency. As a result, if you don’t currently have a large amount of money saved up right now, then it’s probably best to hold off purchasing a home right away.
Ready to Settle Down
When purchasing a home, you also need to consider the mental aspect of settling down. Buying a home is a long-term commitment, and you’re going to be living there for the foreseeable future. If you’re someone who’s not ready to commit to a location for the long-term, then buying a home isn’t for you. This could be for personal reasons, as you may want to move around and explore the world until you find a place that feels like home.
Alternatively, you could have a job that requires you to frequently relocate and move around, or you may not have found a job that you’re ready to commit to for a long period of time. Regardless of the reason, if you’re not mentally prepared to settle down, you’re much better off with a short-term commitment like renting.
The last way to tell whether you’re ready to buy a home has little to do with your financial or personal situation and instead focuses on the economy. The real estate market has peaks and valleys just like any other industry, and that dictates when the best time to buy a home is. There are certain time periods where housing prices are extremely high, and sellers want to capitalize by selling their properties at extremely high prices.
Alternatively, there are times where the housing market crashes, and you could pick up similar properties for much lower prices. Before you buy a home, do some research into the local and national housing markets to determine whether it’s a good time to buy real estate. If it’s not a buyer’s market, then you may be better off renting until the market shifts.