So you’re ready to stop making your landlord rich, and start building your own equity through homeownership. But are you ready for the responsibility of homeownership? Despite what some may think, buying a home isn’t just a financial decision. Buying a home needs to make sense for your specific financial, professional, and personal situation.
Here are five signs that you’re ready to become a homeowner.
- You’re prepared to stay in one place for a while. Purchasing a home is not a good idea if your work is thinking of relocating you across country in the next few years. You should feel confident that you’ll be living in the area with a secure job for the next four to five years in order to recoup the costs of buying and selling.
- You’ve been preapproved. It’s not likely that you’re going to purchase your house without financial help. Before house hunting, you should obtain a letter of preapproval to insure that you’ll be able to secure financing. A preapproval is a written statement from a lender stating the maximum amount its willing to lend to a borrower. To become prequalified, a lender will have to verify your credit score, information and documentation. Important documents in this process include pay stubs, W-2 forms, federal tax returns, and bank statements. This will help you know exactly how much house you can afford.
- You’ve saved up. Saving up money for a house is important for your down payment and an emergency house fund. Owning a home is a full time responsibility, and it requires a lot of maintenance and upkeep. If you were previously renting, your landlord likely took care of issues such as a leaking pipe or a broken AC system. When you’re a homeowner, you’ll need to have money saved up in a rainy day fund to take care of these issues and maintain your home.
- You’re willing to put in the time, effort and money. There’s a lot of time and effort that goes into finding a home that fits your needs and wants, and is within your budget. Don’t forget about the stress and hassle that you’ll experience when you hit a bump in the road. For these reasons, it’s important to have experienced professionals on your side, who will help guide you through the process. Even after you’ve settled into your new home, you need to be prepared to put the time, effort and money into maintaining your home.
- Its good timing. Timing is everything, and that’s especially true when buying a home. If you still have 11 months left on your current lease, it might not be a good time to actively look for a home (but that shouldn’t stop you from researching and exploring your options.) The same rule applies if you only have 30 days left on a lease, and need to find housing immediately.