Have you been looking at your rent payments, wondering if it would be more cost effective if you owned your own home? You’re not alone.
If you’re on the fence about buying versus renting a home, ease your concerns with some research and preparation. There is no “right” age or circumstances for buying a home, as it must be the right situation for you. That said, these are four sure-fire signs that you are ready to purchase a home – do they sound familiar?
1. Your Financial Picture Is In Top Shape
If you’re carrying credit card debt and owe money for loans on your car or education, buying a home now might be difficult. You’re going to need bank approval for your financing, so check out current application guidelines and see how your circumstances hold up.
Start by checking your credit for free to get an idea of how a lender will see you. Is your score in the high 700s or 800s? You’ll probably have less trouble getting a home loan, and you’ll be able to access rates and terms that won’t be a burden. However, if your credit score reflects problems with payments, your lenders may be wary about giving you financing.
Checking your credit is also important to ensure that you don’t have any fraudulent or erroneous reports that may be affecting your score.
2. You Have A Healthy Amount Of Savings
When you rent a property, you need to come up with a security deposit and maybe a month or two of payments – but that’s typically it. When you purchase a house, you’ll need to have money saved for a closing costs, taxes, insurance, as well as plenty left over to take care of any repairs and the cost of making your home livable. You don’t want to move into your home only to find that in the first month of owning it you have to replace all major fixtures, unless you have the savings set aside to take care of it. You should also speak with your loan officer about loan options that can help reduce the amount of cash your bring to close.
A pitfall that many prospective home buyers find is convincing themselves that owning a home costs the same as renting. If you’re comparing your mortgage payments with your rent payments, then this might seem true, but it discounts the additional costs required when you own.
3. Your Plans Are Stable For The Next Five Years
A good way to enter into your first home purchase is knowing that you will be staying put in that house for at least five years. Yes, things may come up, but committing to your location and regular income means your house is less of a burden and more of a home. The temptation of “flipping” has been instilled in us thanks to countless reality shows, but you’re buying a home to live in, and chances are you’re not going to see any significant appreciation within that five-year window anyway.
4. You’re Handy
A major plus side of renting is that when there is a problem, you can call your landlord to handle it. When you own your home, you’re faced with plenty of issues that you are responsible for. This doesn’t mean that you won’t call a plumber when your sink is leaking or a roofer to patch up some broken tiles, but it does mean that you’re willing to get your hands dirty when you need to. If you need a handyman or repairman for every small job around the home you’ll need to pay for it, so if you’re not willing to learn how to figure it out yourself then you’ll need to budget additionally.
If you feel like these descriptions fit your situation, it’s time to start taking the first steps towards buying. Answer a few questions here, and a home lending expert will contact you with loan options.