Answering these eight questions will help you decide.
The idea of owning your home
is an exciting one, but how do you know if you’re ready? Before you take
the plunge, answer the questions below.
What’s your financial situation?
Having a clear understanding
of your finances is necessary when you’re considering buying a home.
Prior to speaking with a real estate agent, you should make a budget to
see how much you can reasonably afford to pay. Don’t forget to factor in
the cost of taxes, insurance premiums, maintenance and other upkeep.
Can you afford even the initial costs?
Down payment amounts vary
based on the type of loan you’re offered or if you’re eligible for a
first-time homebuyers’ program, but remember that the more you put down,
the lower your mortgage payments will be.
Other initial costs can be
substantial: loan set-up fees, home inspections, insurance, property
taxes and other fees will cost you about 2 to 4 percent of your home
price.
Is your money organized?
Hopefully you’re the kind of
person who balances your checkbook and understands where your money
goes, but if you take a more lackadaisical approach to your finances,
you’ll need to step up your game. Get organized, check your credit
report and keep building your savings. Getting your affairs in order
helps you improve your credit score, qualifying you for better interest
rates, and good financial records will help you take full advantage of
tax deductions.
What are your future expenses?
Think ahead to the next few
years. Are you making any big life changes that will hit your wallet
hard? If you’re planning to have children or start paying tuition soon,
you should factor that cost into your decision now. It can become
difficult to replace an aging car or take an expensive vacation once
you’re paying a mortgage.
Do you have an emergency fund?
Before you devote all your
savings into a down payment or upkeep for your house, look at the bigger
picture. You need to build a financial cushion in case of financial
setbacks like unexpected unemployment or serious illness.
It’s not just money that should affect your decision to buy a home.
Are you flexible when it comes to getting what you want?
Your first home may not have
all the bells and whistles you’re looking for. Are you willing to defer
on your wish list now in order to have a home of your own? In a few
years, you may be able to find a home that better suits your needs, but
in the meantime you could also consider fixing up a less expensive home,
buying a home with friends or renting out part of your home for
additional income.
Do you plan to move in three to five years?
There is a lot of effort, time
and cost involved in buying a house – you want to make your investment
pay off for you. In addition to the price of the house itself, you
should also take into the set-up costs already mentioned.
If you’re planning to move in a
year for work or school, you may want to wait until after that time.
Otherwise, you might find yourself in a tough spot if you’re forced to
sell your home for less than its purchase price in a slow market.
Do you enjoy home improvement?
If you’re already looking at
homes, it’s hard not to imagine how adding a fresh coat of paint to the
walls or changing the light fixtures will make a house truly yours. But
if you’re used to calling the landlord for anything that goes awry in
your home, owning a house might be a jarring wake-up call. When you own
your house, any issue becomes your responsibility, from replacing blown
electrical fuses to installing a new roof.
Now is the time to consider
whether you enjoy home improvement projects. Are you confident in your
ability to patch drywall or install a ceiling fan, or would you rather
pay someone else to do it? If it’s the latter, consider that even if you
hire someone else to handle your home improvement issues, you will
still have to invest not only money but your time by researching
contractors and supervising their work.
