Buying a home is both an exciting, nerve-wracking process. It can seem like there’s an endless list of items to keep in mind during the homebuying process with the mortgage loan, house hunting, and the actual buying process. The complicated process can lead some first-time home buyers to question whether they are truly ready to buy a home.
So, how can you know if you are ready to buy a home? There are several questions you can ask yourself to give you a better idea of whether this is the right time to buy a home.
Can you afford to buy?
Before taking out a mortgage and buying a home, it is important to take a deep look into your finances, especially your monthly outgoings and budget. You need to ensure that you can consistently commit to making the mortgage repayments each month. When you take out a mortgage, you are committing to making repayments each month for the duration of the term which could be 30 years. Therefore, it is important to ensure that you can truly afford to make these repayments with your other monthly expenses taken into consideration.
Do your finances support the decision?
Analyze your finances. Do you have any outstanding debts? If you are still paying off a car loan and/or have substantial credit card debt, then you may want to hold off on buying. Adding mortgage repayments to already present outstanding debt makes it even more challenging to stay on top of repayments and paying down the debt.
It is also important to keep in mind that any home improvements and repairs or maintenance that need to be completed in the home will need to be paid for by you. Maintenance and repairs costs can add up, so understanding that you should plan on spending about 1% of the sales price of the home each year on such expenses is important. If you cannot feasibly afford to do so, it may not be the right time to buy.
Have you saved enough?
You aren’t ready to buy a home if you haven’t saved enough for a down payment. Additionally, make sure you have saved more than just the amount for the down payment, as closing costs add up and can end up being 3-5% of the home’s sales price.
Why do you want to buy?
Consider what your motivations are for buying. Are you simply buying because you think “you should?” If the answer is yes, then you most likely aren’t ready to buy a home. Instead, the decision to buy a home should be made because you are ready to settle down, emotionally ready for the long-term investment, and are financially capable of supporting the decision to buy.
The decision to buy isn’t one that should be taken lightly. Understanding the long-term implications of the decision and what you should consider prior to beginning the process may help you ensure you are truly ready to buy a home.