5 Signs You're Ready For Home Ownership
5 Signs You're Ready For Home Ownership
Taking the leap from renting or living with friends and family to having your own home, whether through construction or purchase, may be exhilarating and liberating, and for many, it represents the realization of the dream of home ownership. However, because it is a long-term financial commitment, it is a significant decision for both your future and finances. Beyond external factors like low loan rates, inflation, and competitive pricing, you must examine if this is the correct time for you before making this commitment. Here are five signs that you are ready for home ownership.
1. You have little to no debt
Before buying a house, you should aim to eliminate any outstanding debt, such as credit card payments or loan shacks, as much as possible. You won't have those extra bills, which will reduce the amount of money you have available to pay your mortgage. There may be exceptions to this rule however, you should aim to pay off or reduce your debts before purchasing a property. The extra cash flow that is not being used to pay off other debts can be used to ensure that you can afford other costs associated with being a homeowner, such as property taxes, homeowner's insurance, repairs, upkeep, and finishings. If your debt-to-income ratio is greater than 35 percent, it is not recommended that you purchase a home.
2. You have a stable job
To qualify for a mortgage, you must have a stable full-time permanent job. A steady job is defined as one in which you have worked full-time for at least two years. To lenders, the longer you have been at a job, the more stable it appears.
3. You received an increase in income
A rise in income means you have more money available, which means you can afford your mortgage payments as well as all the additional costs that come with owning a home. Unless you can live an extremely frugal lifestyle until you earn a raise, you should never put more than 35 percent of your monthly salary towards a mortgage payment.
4. You have a healthy down payment saved up
You are ready for home ownership if you have at least a 10% down payment saved for your mortgage outside of your savings and emergency fund totals. If you wish to put down even more money, such as 15% or 20%, that's even better because you'll have more money saved to help you pay bills and cover other obligations. Gone are the days where no down payment was needed. This has caused many people to put themselves at a financial risk where they were unable to afford their homes.
5. You know what you want and how much you can realistically afford
Researching what you can afford in terms of a mortgage payment, house price, and home features are important steps that prepare you for home ownership. You will also need to know how property prices vary depending on where you wish to leave. Other variables to consider when deciding what you want, includes the length of time it will take you to commute to work, the facilities that come with the house, and be sure to look into the crime rates in the area. While it's exciting and pleasant to fall in love with a location, it's important to have as much information as possible about the circumstances to keep you grounded about what you really want and how much you can spend.
If you can affirmatively respond "yes" to each of these questions, it's time to go on to the next stage of getting prequalified, locating a realtor, and touring properties for sale. Your dream of becoming a homeowner is becoming a reality.
