Everyone dreams of owning their own place, but how do you know when you’re ready to buy a home of your own? With interest rates still hovering at very low rates, it’s a good time to consider buying, but is right for you? Here are five questions that can help you determine if you’re ready to become a homeowner.
Are you financially ready to buy a home?
Living paycheck to paycheck? Struggling to make rent? If so, then buying a home might not be right for you. If, however, you’ve put away some money for a down payment…most financial advisors recommend at least 10%…although you’ll need 20% to get the best mortgage rates and avoid private mortgage insurance fees, then buying a home might be a good option for you. You’ll need to evaluate your monthly monetary obligations, car payments, student loans and credit cards vs. your income. A rent vs. own calculator can help you assess what makes sense for you financially.
Is your credit rating ready to buy a home?
Not only will a poor credit rating make getting the best mortgage rate difficult, it’s indicative of questionable spending habits. Make sure your credit score is worthy of a home mortgage before you start thinking about home ownership.
Even if you’re financially ready to buy a new home, how long will you stay?
Today’s financial planners suggest a 5- to 7-year stay is necessary to make the costs (closing costs, moving expenses, HOA fees) of a new home worthwhile. But, if you’re planning to stay put, then home ownership may indeed make sense. Locking into a fixed rate means you’ll know your costs moving forward vs. a landlord raising your rents annually.
Are you handy?
The monthly mortgage payment is only the beginning home ownership expenses. Repairs are inevitable. Are you a do-it-yourself guru or will every little repair involve a professional? If the latter, just be sure you’re financially capable of paying extra for the handyman.
Are you old enough to buy a home?
The average age of today’s first time homebuyer remains relatively unchanged over the decades at 30-32 years old. In fact, “homebuyers under the age 35 made up 61% of first-time buyer transactions,” says Lawrence Yun, chief economist for the National Association of Realtors. The reality is anyone over the age of 18 is legally eligible to buy a home, so your answers to the previous questions truly have more bearing on whether you’re ready to buy a home than the number of candles on your birthday cake.
How to buy a house…
Getting started is easy. Check out Partner Colorado’s mortgage information and online tools to help you evaluate how much home you can afford. Our mortgage professionals can help get you pre-approved for the house of your dreams.