With so much confusion surrounding the housing market today, how do you know when you’re ready to buy a home? Most Americans dream of owning a home, yet so few are able to make this dream a reality today. Buying a home is a huge financial decision. There are not only a lot of unexpected costs of owning a home, but many housing markets are expensive.
That being said, most renters are tired of throwing their money away for nothing. Buying a home means gaining equity and growing your assets. Are you ready to buy a home? This guide will discuss whether you’re ready to take this big step towards buying a home!
First, How Are Your Finances?
Obviously, your first step is understanding your own financial situation. Your bank accounts can’t lie, and they’re the best source of information about whether or not you’re prepared to own a home. Do you have any debt? What kind of debt? Do you have loans? While it’s okay to have loans and some debt if you’re planning to buy a home, you need to realize how this will affect your mortgage. Use this mortgage calculator to assess your cost of buying a home with your current finances.
How is Your Credit Score?
The better your credit score, the more likely you’ll get a great rate on a home loan. While it’s possible to get a home with an average credit score, you should expect to pay a higher interest rate than those with better scores. Before buying a home you should carefully monitor your credit score! Be proactive with your credit by making large payments towards debt and checking your credit for unusual activity.
Do You Have Money for a Down Payment?
The hardest financial part about affording a home is affording a large down payment. It’s understood that the greater your down payment, the better fit you are to own a home. While you don’t need to make a 20% downpayment to afford a loan, you need to be serious with your payment. There are some options for those who are only able to pay between 3.5% and 10%, but this comes with additional insurance needs which will drive up your monthly rates. In general, you should prepare yourself with savings prior to searching for homes!
Can You Afford to Own a Home
The best part about renting a home is not worrying about unexpected payments. If something breaks, your landlord has to take care of it. When you own a home it’s all up to you. The entire home becomes your responsibility, and that can add up pretty fast depending on the age of your home. It’s impossible to prepare for the unexpected. That’s why it’s called unexpected! You need to have money put away securely to afford any unexpected surprises.
In addition to unexpected payments for repairs and maintenance, you’ll also need to afford your cost associated with buying a home. There are more things to pay than simply your down payment! Your closing costs can add up quickly, and you also need to include the cost of moving. Owning a home also comes with fees like property taxes, insurance, fees, and utilities. Really consider if you can afford this price before making that big step!
Preparing to Buy a Home
Buying a home is a big decision you shouldn’t make lightly. You’ll need to think long and hard about the reality of your financial situation. How is your credit score? Are you able to make a decent down payment? Do you have savings to pay for unexpected costs? These are all questions you need to ask before buying a home. When you’re ready, you’ll be able to make the best choice about buying a home!