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How to decide if I’m ready to buy a house?
What you need to consider to make your big decision
So, you’re starting to think about whether you’re ready to buy a house. Let us be the first to say “Congratulations!” and also the first to say “Take a deep breath!” The process can feel intimidating to a lot of people, and studies say it can be one of the most stressful processes you can go through in your life. In fact, even starting the process can be stressful, as many people don’t even know when they should begin looking — or thinking about looking.
Don’t worry. We’re here to help. Read on to learn how to take a look at yourself and your life and identify signs that you ARE ready to take the plunge… or signs that you aren’t.
Financial considerations for buying a home
This is probably the biggest factor for many people. A house is a big financial investment and that’s a big deal. It’s likely the largest purchase you’ll ever make and that can be stressful. If you’re thinking about taking the plunge, take a look at your finances to see if they’re in order. Here are some things to look for:
How big is your debt?
The amount of debt you have can have a major negative impact on your finances. If you’ve got a ton of student debt or credit card debt that’s built up over the course of a few years, you might not be in the best position to buy a house.
Your debt-to-income (DTI) ratio is an important metric that lenders will look at when they’re evaluating your mortgage applications. If your debt is high and your income is low, you might not even get a mortgage, or you might get approved for a loan with a huge interest rate. Even if you do get approved, you’re going to have to spend down that debt while paying your mortgage, which means you may have to cut back on the things you really love, you know, like accordion lessons or the pie-of-the-month-club.
Can you afford the down payment for a house?
Now, not every mortgage requires a down payment… but most do. If you want to get a standard loan with a reasonable interest rate, you’ll want to consider putting down a sizable down payment — as much as 20% in many cases.
Does that down payment sound doable or does it sound scary?
That’s something to consider. Some people wait until they can comfortably afford a 20% down payment, but some people would rather get started with the process earlier. It’s a tough choice to make, but it’s an important factor to consider. If you rush into a mortgage before you can afford a good down payment, you may have to pay a higher interest rate or a higher rate of mortgage insurance. If you’re willing to do that, you may be ready to buy a house, but if you haven’t even considered it — and done at least some quick math with your #2 pencil, then you’re most likely not ready.
How strong is your credit score?
This is a topic you’ve probably heard a lot about, and with good reason. Your credit score plays an extremely important role in your house-buying journey. If you’re scratching your head, wondering what goes into a credit score, then you probably need at least a little time before you’re ready to buy a home. Even if you do know what it is, you’ll want to take a look at your credit score and see where it stacks up.
Is your credit score above 640? If so, you may be ready to start thinking about buying a house. If it’s not, well, it’s probably a good idea to try and get your score up before you start hunting. Some lenders will work with you if your score is lower, but most won’t, so you’ll want to focus on getting yours into the right range so you can get a loan with a decent interest rate.
Personal considerations to buying a home
While people tend to think of the financial costs of buying a house — and they’re big, of course — becoming a homeowner can lead to some serious life changes, too. You’ll want to make sure your personal life is as ready as your finances. Here are some things to keep in mind:
Are you handy?
Depending on how you’ve lived before, it’s possible you’ve never had to do chores like replacing the flapper on your toilet, installing a new lock on a door or even mowing your lawn. Many people who lived with their parents were not responsible for such tasks and those who lived in dorms or apartments probably had someone (like a super) to take care of such matters.
So, are you ready to do it yourself (as they say)? It may seem simple, and for many people, it is. But some people simply don’t consider themselves handy or don’t want to buy tools and supplies to teach themselves to take care of repairs or chores. Sure, you can always pay someone to do it for you, but most homeowners at least want to learn how to take care of the small stuff. It’s something to keep in mind when you consider the responsibilities of home ownership.
Do you want to settle down?
Some people love the apartment lifestyle. They love having a doorman, maybe, or lots of neighbors who are really close. They love socializing in the laundry room and greeting their neighbors when picking up a package in the lobby.
Or maybe they love moving around a lot. Some people wait until their lease is up and zip from apartment to apartment, bringing their few belongings with them. They don’t see themselves as tied to one place and they like it that way.
So, ask yourself, are you ready for a real (estate) commitment? When you buy a house, you should know that you’re likely locking yourself into one home for years to come. In fact, you may be in the same house for 30 years or more! To some people, that sounds like an awesome idea. To some, it sounds more like a prison. Think about your feelings on this. If you think you’ll feel trapped in a couple years, then maybe you’re not ready to settle down after all.
Does it fit your future?
This can be a tough one to pin down, but bear with us here. Your house will be your main base, your financial rock, and a source of memories — good ones, frustrating ones, and a wider range than that — for quite a long time. So, can you picture yourself in a home where all that happens?
Think, for example, about your job. Are you likely to change jobs soon? If so, would you have a longer or more complex commute or even be forced to sell your house and move to a different state? And what about travel? Do you think you’ll get the sudden urge to pick up and head to Peru to backpack through the Andes for 6 months? If so, then having a house and a mortgage sitting back home while you go on an adventure might not be a great fit.
So, take a moment and think about the house. Is it what you want? Will it help you achieve other goals (starting a family, hosting the best barbecues in the land, having your own air hockey table in the basement and bocce pit in your backyard, etc., etc.) or do you think it will weigh you down? If you think the latter is likely, then maybe you’ll want to find your forever job or get the traveling out of your system before you buy a house. That way, you won’t have any regrets and you won’t feel trapped. You’ll want to buy a house when you’re ready, and you’ll want it to make you happy (well, except when something leaks. No one likes that!)
Ready, willing and able
There are a lot more factors that can go into your decision (maybe you have a family or romantic partner to consider, or maybe you’re superstitious (well, maybe don’t let that be a factor!). But the above financial and personal considerations are a good place to start when figuring out if you’re ready to buy a house. In the end, the decision will be made up of a magical formula of logic and gut instinct. Take care of the logical parts first and then see if it feels right. If so, well, good luck with the process!
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