Owning a home remains one of the components of living the American Dream. But as the recent housing crisis illustrates, jumping into homeownership without being adequately prepared for everything it entails can be the start of a financial downfall. Owning a home is about much more than having a down payment and being able to pay the mortgage every month. Here are several things to consider to help you determine if you are ready to buy a home.
Your Current Financial State — You need to take a deep dive into your finances before deciding to buy a home. First and foremost, you must have enough money saved for a down payment and be earning enough to cover the monthly mortgage payment. You also need to check your credit score and review your credit report to ensure it is accurate. If you’re already carrying a high debt load, you will want to pay off a good portion of it before applying for a mortgage. If you’re not sure where you stand financially, Home Ready counseling is a great place to start.
Your Financial Future — While we can never predict the future, you should have some idea in mind of what your financial future holds. Is your job secure? Are you receiving regular raises or bonuses? Do you have a “plan B” in mind if you were to lose your job or were asked to relocate? Do you have emergency savings to cover your living expenses for 3-6 months? These are all questions you need to ask yourself before making the commitment to buy a home.
Ongoing Costs and Maintenance — If you’re used to renting an apartment, you’re responsible for paying your rent every month and that’s it. When you own your home, you’re responsible for everything that has to do with the property including yard maintenance, home repair, property taxes and homeowner’s insurance. Not only is owning a home potentially more costly, it’s also a bigger time commitment. Ask yourself if you’re really ready for the additional responsibilities of home ownership before taking on the financial responsibilities.
How Long You Plan to Stay — There was a time when conventional wisdom dictated that staying in a home two years was long enough to recoup your initial investment and make a profit, but that has changed. Experts now recommend staying in a home for a minimum of 3-5 years before considering selling. Of course, there’s no way to accurately predict how the housing market will fluctuate year-to-year, but if you’re someone with wanderlust who gets bored easily, buying a home may not be for you.