Are You Ready to Buy a Home?

When you think of buying your first home, you want to make sure that you are fully prepared. There are a few questions that you should ask yourself which can gauge whether or not you should actually be looking to buy a home.

Question One: Do you know how long you will be in the area that you’re looking to buy a home in?

You want to make sure that you will be staying in this area for at least three to five years. When you stay at the home for that long then you will be able to hopefully break even on the mortgage to make it easier to move. If you feel that you will move after one year, then it may not be best to look into buying options right now and you may want to hold off.

Question Two: Can you handle the cost of a home?

Buying a home is a daunting task. This is a huge expense that can take decades to pay off. That being said, you should make sure that your mortgage does not surpass 25% of your gross income. Your gross income is the amount of money you make from your employer before taxes and other deductions are taken out. If you are willing to stretch the budget a little bit then it definitely should not exceed 28% of your gross income. This budget stretch should only happen if you have no other debts. Your combined bills from mortgage, to car, to phone, etc., should not be more than 33% of your gross income.

Question Three: How will you finance the loan?

This is a super important question because you will know where your money is coming from. You want to understand the different types of loan you will encounter which will determine if you are ready to move. If you will be financing your future home with an adjustable rate mortgage (ARM), then you may want to avoid buying a home for the time being. This option can have your interest rate increase and cause your monthly payments to get higher. This loan option is also a risk because you run the chance that your equity may not grow as fast as you need. A good loan to get when buying a home is an 80/20 loan. This loan requires the borrower to pay off the 20% that you owe as soon as possible. Another loan that you may be eligible for is a Federal Housing Administration (FHA) loan if this is your first time buying a home. You should take into consideration the length of the loan as well. There are mortgage options of 10, 15, 20, and 30 years. The longer the mortgage the less the monthly payment but the more overall interest.

Question Four: Home inspection results?

You want to make sure that the home you are buying passes all inspections. Some loans require home inspection but even if they don’t it is important that you have a home inspector look through the house. The inspection will help you avoid expensive repairs that lie beneath the surface of the home. You don’t want any surprises as you are moving in.

Question 5: Can you handle the responsibility?

This is also another important question to ask yourself because when you become a homeowner, you take on a lot of responsibility. You are now responsible for everything inside the house, outside the house, and on the property. Due to the fact that you will be handling a lot, you want to make sure you have around $25,000 saved up as an emergency fund for the home. This will allow you to cover a lot of big projects that you could potentially encounter.

If you can answer these questions with confidence and correctly then you know that you will likely be able to begin your home buying process Take your time and overall you will see that even though it is a lot of responsibility, you will be able to handle it well.