How To Know If You’re Ready
Buying your first home is a landmark in life, especially here in America. Owning a home symbolizes independence, financial security and a space in the world that’s all yours. But while you may be fantasizing about the perfect home, before you actually start shopping it’s wise to ask yourself a few questions to be sure you’re ready.
What’s Your Credit Score?
For the majority of us, buying a home means taking out a mortgage. While lenders look at a many factors, including income, debt and savings, your credit score is especially key in determining whether you will qualify for financing. And if you are approved, your score will then affect the interest rates and terms you’re offered. So before you start shopping have your credit report run. Timelines for improving your score will vary based on where it started, as well as the type of damage it’s recovering from. If your score isn’t great, you may want to put the house hunt on pause to build it back up. Another thing to keep in mind is that if you’re buying a home with a partner, your credit scores will be looked at as a whole. In other words, if your score is excellent but your partner’s isn’t you might not receive the rates you would on your own.
How Much Do You Have Saved?
When you’re buying a home, there are a lot of expenses besides just the cost of the house. Knowing what these expenses are, and budgeting for them, is an important step to preparing to buy a house. Most people know they need to have money saved for a down payment. As a first time buyer, this can be much lower than the typically suggested 20% of sale price as there are many programs designed to incentivize you. But a down payment is not the only cost to consider. There are also costs associated with closing - fees paid to lawyer, agents, title fees, etc. The exact fees will differ from region to region, but in general closing costs will range between 2-5% of the sale price. Both the down payment and the closing costs are part of the cost of actually buying a house, but remember, once you move in, there may be additional items you’ll need. You’ll want to have money saved for things such as painting the walls, new furniture or other home improvements you may want/need done.
Can You Afford It?
The thought of owning a home can evoke a lot of emotions in people, but it’s important to be clear headed when deciding if you can really afford to buy your dream home. No one wants to find themselves struggling to make mortgage payments or discovering that they are now “house-poor” (where the cost of owning your home eats up an excessive amount of your income). After you’ve examined your credit score and considered the real expenses of buying a home, you will be able to answer the question of if you can afford it much more easily. Another way to determine if you can afford to buy a home is to become pre-qualified for a loan. Take the time to meet with different lenders, compare mortgage programs. If you go through the process of being pre-qualified, you will know exactly what you can afford and which houses are in your budget.
Are You Ready for the Responsibility?
In the fantasy, owning a home means creating a perfect little oasis just for you and your loved ones. But in reality, nothing is perfect. Drains clog, pests invade and appliances break. Before you make the decision to buy a home, try to imagine the reality of home ownership. There are many benefits to owning your own home, and buying for the first time is especially exciting. If you’ve checked off all the boxes early on, the buying process will be much less stressful and will move much more smoothly. Plus, if you’re not stressed about the process, you can focus your energy on finding the perfect home to fall in love with!