Are You Really Ready to Buy a Home? 4 Things to Think About First
The decision to become a homeowner is a very personal one, which means it should be decided by your personal situation and finances – NOT because everyone else around you is doing it. We cover the big questions to ask yourself and when it means the time is right for YOU.
So are you really ready to be a homeowner? Let’s find out:
1. Can I Afford It?
When purchasing a home, the immediate costs will be the downpayment and closing costs. Keep in mind, there are plenty of programs for first-time homebuyers that can help lower both your monthly payments and cash required upfront. Depending on your particular situation, you could put as little as 3% towards your downpayment. Yes, that’s right, you do not need to put down 20% to buy a home and typically with your first home, it’s not the best idea to put so much down anyway. In addition to your downpayment, your closing costs will be around 3% of the purchase price. Buyer programs and grants can make a world of difference, so ask an expert about all your options.
Once you are a homeowner, you want to make sure you can afford your monthly payments. Understand that on top of your mortgage payments, you’ll also need to pay for condo fees (if any), insurance, and taxes. In addition, you’ll need to cover your utilities and home maintenance. Start a budget, if you don’t already have one. Be realistic about your spending. When you meet with your real estate agent, go over how much you would ideally like to pay each month for a mortgage.
Once you decide what your monthly payment and downpayment amount should be based on your particular desires, then and only then, should you start looking at homes in a certain price point. This is the best way to stay within your comfort level and not be “house poor.”
2. How is my credit?
It’s a really smart idea to take a look at your credit score and history as soon as you start asking yourself if you’re ready to buy a home. It never hurts to have a solid grasp on what’s in there. Ideally, your credit score should be at least 680, and the higher your credit score, the better the available loan products and interest rates will be.
MyFICO or another credit monitoring company would be a great place to sign up for regular credit reports. With all the credit fraud happening right now, your credit could be compromised for a reason that has nothing to do with you!
But, don’t worry! There are steps you can take to improve or repair your score, which is why taking a look ASAP is a good idea. If there are marks on your credit history, look into each one, check for accuracy and then take action.
3. Am I planning to stay put for the next 3 to 5 years?
If the answer is yes, then most likely, buying now is the smart financial choice. According to Zillow’s break even research, if you plan to stay in DC for the next 3-4 years, it would pay to buy instead of rent.
Check out these interactive maps and graphs for more information on your area.
4. Am I ready to take care of a home?
Being a homeowner means maintaining a home. But, you don’t have to know everything about how to take care of it before you buy. There’s no shame in not knowing how to hold a hammer – you can learn or hire a professional. All you need to know is when you can figure a repair out on your own and when you need to hire a professional. We always say a good rule of thumb is: leave plumbing and electrical to the professionals! Your home is your dwelling but it’s also an investment, so educating yourself on what to do to keep it up is an important part. Here’s a great article we wrote about what you need to do when it comes to Maintaining Your Home.
Once you ask yourself the questions above, then proceed accordingly. The best advice to keep in mind is that the answers will always depend on your personal plans and circumstances. If you do decide to by a home, do it because it makes sense for YOU and your life over the next few years, not because the news or your friends say you should.
If now is the right time, check out our Buying a Home 101 series, where we tell you all the steps and details you need to know throughout the home buying process.