How to Tell If You're Ready to Buy a Home
There's certainly a lot on your mind if you're trying to decide whether you're ready to buy a home. You're considering your finances, current mortgage rates and housing prices, the restricted availability of available homes for sale, and other factors. And you're trying to figure out how all of that will affect your decision.
“Housing market trends give important context. But whether this is a good time to buy a house also depends on your financial situation, life goals, and readiness to become a homeowner.”
Instead of attempting to time the market, it may be more beneficial to concentrate on what you can control. Here are a few questions to help you decide whether you're ready to make a move.
1. Do You Have a Stable Job?
One thing to think about is how secure you believe your job is. Purchasing a home is a significant investment, and you will be required to sign a home loan agreement indicating that you will repay the loan. That can feel like a big obligation. Knowing you have a reliable job and income coming in can help put your mind at ease. As NerdWallet explains:
“A mortgage is a big commitment . . . Wait until your employment is stable before thinking about buying a house.”
2. Have You Figured Out What You Can Afford?
Speak with a reliable lender to ensure you have a solid understanding of what you'll need to save and what you can expect to spend on your monthly payment. They'll be able to tell you about the pre-approval process and how much you can borrow, current mortgage rates and estimated monthly payments, closing expenses to expect, what percentage of the home's purchase price you'll need for a down payment, and more.
The best part is you may find out you’re closer to your goals than you realized. Unless your lender or loan type specifically requires it, you don't necessarily need to put 20% down. As Down Payment Resource says:
“A 20% down payment on a home is great, but . . . Many mortgages require no more than 3% to 5% of the purchase price as a down payment. Plus, there are loans and grants that may help cover these costs. Search for down payment assistance in your area, and discuss your results with your mortgage lender . . .”
3. How Long Do You Plan to Live There?
Another important thing to think about is how long you plan to stay put. It takes time to build equity in your home through paying down your loan and home price appreciation. If you plan to move too soon, you may not recoup your investment. For example, if you’re looking to sell and move again in a year, it might not make sense to buy right now. As a recent article from CNET says:
“Buying a home is a good idea if you’re planning to stay put for at least three years. Home values typically increase between 2% and 5% annually, so you could end up paying more in closing costs than you’d earn in proceeds if you sell after only a year or two.”
So, consider your options for the future. If you intend to relocate to a different city as part of your impending promotion, or if you predict that your loved ones will require you to move closer to care for them, this is something to consider.
Above all else, the most important question to answer is: do you have a team of real estate professionals in place? If not, finding a trusted local agent and a lender is a good first step.
These questions can help you decide if you're ready to buy a house. However, your finest and most reliable resource is the assistance of trusted real estate agents.