How to Tell If You Are Ready to Buy a House

Buying your first home represents a substantial lifestyle change for most people. Becoming a homeowner is up there with finishing school or having a child in terms of accomplishments. It becomes one of the most significant financial decisions you’ll make. If you’re wondering whether you’re ready to buy a house, this cheat sheet will show you what to consider. In some cases, you just need to run the numbers, while in others, there might need to be some soul searching. Once you’ve gone through this list, you’ll know how to tell if you are ready to buy a house.

You Should Feel Good About Buying a House If: 

Here are five signs you might be ready to buy. Of course, this isn’t a checklist, so having all five is not necessary. But if this sound like you, you could already be on the path to homeownership.

1. You Have a Steady Income 

Whether you’re self-employed, work a 9-to-5, or have some combination of the two, you are making money. A steady income is important for receiving a home loan. It is a way mortgage lenders can tell if you can repay a loan. Most mortgage lenders will request documentation showing you’ve been employed for at least two years. Lack of steady employment or an incomplete history makes it harder to qualify for a mortgage.

2. You Have Clear, Solid Plans for the Immediate Future

It’s easy to break an apartment lease if you decide a place isn’t working for you; it’s more expensive and much more involved to sell a home you’ve purchased because buying a house is a huge commitment. Knowing your future needs helps determine what type of home you should look to buy. For example, if you want kids, it would make more sense to shop for a three-bedroom now instead of struggling to sell your starter home later.

3. You Have a Savings for a Down Payment

Saving for a down payment is one of the biggest hurdles to overcome on the path to homeownership. Depending on the home loan you’re using, you’ll likely make a down payment that’s between 3% and 10% of the purchase price. Don’t forget about closing costs, which will run about 2% to 5% of the total price. Having savings stored away for these payments puts you much closer to owning that home.

4. You’re Ready to Take Ownership

Besides paying the mortgage, owning a house comes with plenty of responsibilities. All the stuff you would ask your landlord or super to take care of is now your job (unless you pay someone else to do it, which is another expense). You’ll have to give up some of your weekends and other free time for home maintenance. One way to avoid some work is to buy a condo instead of a detached house. You’ll have less autonomy, but homeowners’ association fees should handle most of your maintenance.

5. You Can Afford a Location That Meets Your Needs

Buying a house because you can afford a house is not the same as buying where you actually want to live. If you’ve found a town that fits your lifestyle and bank account, you might be ready to start looking. You might need to make tradeoffs like compromising on your commute for a better school district, but this isn’t just an investment; it’s your home. It’s best to buy in a place that is best for you.

You Should Postpone Buying a House If: 

These five things should be considered yellow lights. Not necessarily a hard stop, but a “proceed with caution.” Remember, these can change as your perspective and plans evolve.

1. You’re Reacting to Pressure

Yes, it might feel like all your friends are posting photos of themselves standing on a front porch with the caption, “So we did a thing,” but it’s okay to keep scrolling. It doesn’t matter if it’s an investment that proves you’re a grown-up or whatever people tell you; if you don’t feel ready to buy a house, then it’s not time. Market conditions change, but the housing market is always there. There’s no rush if you are happy where you are or if you want to be more prepared before you buy.

2. Your Credit Score Could Use Some Work

Mortgage lenders look at your credit score as one of the more important things. Your income tells lenders whether you have the money to pay your mortgage, but your credit score indicates whether or not you’ll make the payments. That magic number can determine whether you qualify for a loan and the terms you’ll be offered: the higher your credit score, the lower the interest rate. Improving your credit score before you get into the homebuying game could help you qualify for a mortgage with more favorable terms that could save you money in the long run.

3. You Have Significant Debt

Mortgage lenders don’t just look at the money you’re earning; they also look at your debt using a debt-to-income ratio (DTI). Most lenders want borrowers to have a DTI that’s 36% or less. If your DTI is 40% or higher, it’s best to decrease your debt before buying a home.

4. You Don’t Want to Be Tied Down

Are you dreaming of traveling? Have you considered going back to school or taking some time to think about what you want to do with your life? Then it might not be the best time to become a new homeowner. Making a change that reduces your income substantially could jeopardize paying your mortgage. If you are away, staying on top of a home’s upkeep becomes hard. If emergency repairs are needed, someone should be at your home to resolve them.

5. Your Mortgage Payments Would Stretch Your Budget

Homeownership prices continue to rise, making affordable houses hard to find. And homeownership has lots of costs beyond paying your mortgage. If your mortgage payment would leave little to no wiggle room in your budget, buying a home right now might not be the right move for you. Consider starting a savings in preparation for when you are financially ready to buy your new home.

Move Towards Home Ownership with Community Mortgage 

Now that you’ve gone through our list, are you closer to buying a home, or will you continue to live where you are now? If buying a home is the next big step in your life, Community Mortgage is here to help! We will work with you to help you find the best mortgage options so you can achieve and maintain homeownership. Schedule your FREE Mortgage Consultation by calling us at (619) 692-3630 or visiting our website!