You have the job of your dreams. You think it’s time to put down roots, maybe even start a family. It might also be time to consider buying a new home. But are you ready? It’s important to ask yourself a few important questions before taking the plunge into homeownership.
1. Why do you want to buy a home?
Don’t look at buying a home through rose-colored glasses. A house isn’t a status symbol; it’s an investment, and in some instances, that investment might be a risk. Take a good, hard look at what you can afford before getting serious about owning a home. Don’t fudge the numbers, either; it’s essential to be as realistic as possible. There are some great calculators online (like this calculator from MSN Money) that will let you plug in the numbers to see if buying a home makes sense – of if you can afford it.
2. How secure is your job?
It would be nice if we all had crystal balls, but the fact is there’s no way to know if you’ll be laid off today, tomorrow, or next week. Still, you can do some predicting of your own. Ask yourself how easy it would be to find a new job if you lost your current one. Do you live in an area where unemployment rates are high? If you do, you might want to think twice about putting down roots. Make sure you’re job is secure as possible before taking on a loan.
3. Are you good at paying your bills?
Be honest. Do you pay your bills on time? Or are you continually robbing Peter to pay Paul? If you are, you’re not ready for a mortgage. Getting behind on a mortgage is a serious business. You don’t just stand to lose a credit limit; you’ll lose the roof over your head.
4. Do you have a lot of debt?
Car payments, credit card payments, student loans – it all adds up. How much money do you have left at the end of the month? Is it enough to pay a mortgage? You should be as debt-free as possible before taking on something as big as a mortgage.
Get a few of these debt-free habits in your routine to demolish those balances before considering homeownership.
5. Can you save up a down payment?
Are you making enough for a 20% down payment? Failing that, do you have any assets you can sell? You might have to cut back on your “fun money” for a long time if you’re serious about saving up to buy a home. Take a look at your cash flow. Are you prepared to do that?
6. Can you pre-qualify for a loan?
Have you examined your credit score lately? It’s essential to do your research before approaching lenders. Most real estate professionals recommend you pre-qualify for a loan, too. This is where planning ahead comes in handy. Pull those scores and see what you’re dealing with. Find out which lenders will loan you money before showing up at their door.
7. Do you want to buy a home when you can keep on renting?
Look around. Is the housing market in your area stable? Or is it fluctuating up and down? You don’t want to get into a situation where you have to sell your house for less than what it’s worth. As mentioned above, sometimes it makes more sense to rent and let a landlord assume the risk, not you. None of us can predict the economy. If the market takes a plunge, that might mean a loss of equity. You might have to wait for market conditions to improve. Sometimes that might take years. You’ll need to be patient if you hope to see a return on your investment.
Related article: Home Ownership: Is It Really Worth It?
8. Are you sure you want to stay in one spot?
Buying a home is an investment, and like most good investments, it means sticking it out, sometimes for an extended time. Do you want to live in that town forever, or do you foresee a lot of moves in the future? One of the benefits of renting is the flexibility of relocating when your lease is up, or after a job loss.
9. Do you have enough money for home repairs?
Roofs leak. Pipes break. Appliances die. Can you afford to replace them? There’s more to owning a home than getting to paint and have pets. You’ll need to keep the house in good, functional shape if you ever plan on reselling. Prepare to put a large portion of your paychecks into a savings account just for home repairs.
10. Have you done your research?
Just because you’ve watched a few episodes of House Hunters doesn’t mean you know how to buy a house. There are endless questions you can ask, and too many topics to cover. Are you studied up on the technical mumbo-jumbo realtors and banks like to use? Do you know where you want to live? Which neighborhoods are good and which are bad? Use social media and ask around. We also recommend asking local law enforcement for advice. After all, it’s their job to patrol the streets so they know which areas you should avoid.
You’ll want to research schools if you’re planning to have children in the future. The Internet is loaded with tales of woe of people who’ve bought their dream home only to discover they live next door to Yosemite Sam.
It’s easy to overlook the little things while in the thrall of a big purchase. Don’t be caught by surprise by forgetting you’ll need to pay property taxes or those pesky home owner’s association dues. Think long and hard, and ask yourself these tough questions. After all, buying a home should be exciting, not terrifying. If you think you’re ready to take the next step, the Housing and Urban Development site will become your best friend.