How to be sure you are ready to buy a house
6 Check Points to Help You Know if You Are Ready to Buy a House.
Buying a home should be an exciting time. Home ownership is a major milestone in building security, financial strength and wealth. BUT if you buy a home before you are ready, what should be a blessing will be a burden. There are 6 things you should be sure to have completed before buying a home.
Clear Debt - Being debt-free before you buy a home allows you to free up your income to build a good down payment and ensure that you will have the monthly income needed to pay all costs along with having a home and a mortgage.
3-6 Month Emergency Fund - Before buying a home, you will want to have 3-6 months of expenses as an emergency fund set up. This is a critical step! Homeownership comes will all types of pitfalls (things break and need to be replaced all the time) that will cost you money. Having an emergency fund set up so that you don’t go into debt the first time your roof leaks or your toilet overflows is critical. When it comes to homeownership, it’s not IF, it’s WHEN will something break. Having an emergency fund will stop you from going into debt to address these issues.
Downpayment and Closing Costs - Before buying a house you will want to have a sizable downpayment and your closing costs saved up. Ideally, having 20% to put down on a home will allow you to avoid costly PMI (private mortgage insurance) payments. Your closing costs will vary based on the price of the house. Your lender and/or real estate agent should be able to help you estimate your closing costs but planning for about 3-5% is a good plan. You can buy a home with less than 20% down, but you will be required to pay PMI. Additionally, you want to keep your mortgage payment at about 25% of your monthly take home pay, so putting less than 20% down may change the home that you can buy.
Research where you want to live - Before buying a home you should decide where you want to live. You should do your own research on areas and weigh the pros and cons of different areas. Typically, the further away from the downtown center the more home you can get for your money. You should consider factors like commute, schools, shopping and any other factors that are important to you and your lifestyle.
Research other costs - As you are deciding where you want to live, it is important to start researching what the costs of insurance, HOA fees, Mello-Roos fees and any other fees might be to live in that area. Insurance alone can fluctuate greatly from community to community. Be sure you know what your insurance is going to cost and that you are comfortable working that into your budget.
Find a REALTOR and Lender - Once you have decided that you are ready to purchase. You should find an experienced real estate agent. A good agent will walk you through the entire process, they will help guide you so that you can make good decisions. They will also be able to help you compare different scenarios and can usually refer you to other professionals to help with things like mortgages, insurance and inspections.
Once you have gone through all the above steps, you may be ready to buy. Buying and owning a home is a wonderful experience and one we want you to have, as long as you are ready. Don’t let other people in your life tell you when you are ready. Don’t rush the process and don’t feel like renting is a bad thing. You will know when you are ready. If you still have questions or aren’t sure if you are ready, give us a call, we can help you determine if NOW is the right time to buy.
