One of the biggest purchases (in many cases the biggest) you’ll make in your life is a new home. Are you ready for the financial responsibility? We've put together some key indicators to assist you in making this important decision.
Your Credit is in Order
While perfect credit isn’t required to get a mortgage, it does help. If you have outstanding debts, you’ll want to pay those down before starting the mortgage process.
If your credit is not-so-great, you may want to take steps to improve it first. You can get your credit report yearly at annualcreditreport.com. You can also take our credit quiz to see how well you know credit.
You’ve Saved for More than the Down Payment
Having cash for a down payment is standard, but many people forget that there are many more expenses when you first purchase.
Along with your mortgage payment, you’ll need to consider HOA fees, property taxes and closing costs. You’ll also need moving expenses and furniture/appliances. If you’re moving into a bigger place, you may need to make some purchases to fill the space.
It’s also a good idea to have a sizable emergency fund. We suggest having 6 months of living expenses on hand, in case of an unexpected situation.
You Know What You Want
Make sure you do your research on homes before you start looking. Go into your home buying process knowing the price you’re willing to pay, and the type of home you’re looking for.
Location is an important consideration for many people. If you’re not willing to compromise on this, make sure you know which neighborhoods you can afford in the area.
You’ve Considered Your Budget
Many people put a large portion of their budget into their home. Is that the best use of your funds? Know exactly where your money is going now, including things like groceries and entertainment. You may need to cut back on some lifestyle items to focus on your home.
Don’t forget about saving for retirement. Your house in an investment, but not something to bank on for retirement.
You’re Ready to Settle in the Area
Whichever neighborhood you decide to settle in, make sure it matches your lifestyle. If you have or are planning to have kids, are the schools what you want. Keep in mind that the longer you stay in a home, the more equity you will build and if you move before 2 years you could be hit with capital gains tax.
You’re all-in on Repairs and Maintenance
Unlike renting, repairs in your own home are your responsibility and not up to a landlord. Make sure you have time and budget to deal any unexpected maintenance issues.
An often overlooked asset is your yard. If you’re looking to own a yard, make sure you have time to tend to it and enjoy it.