If rising rent prices have you down, it might be time to buy a home!
Are you ready to have a home of your own without answering to a property management office for every decision you make? It might be time to seriously consider if it’s time to buy a home of your own. While owning your own home is typically seen as the American dream, it’s not for everyone. Since it takes more than just wanting a home to actually own and maintain one, you need to make sure that you are ready to own before you decide to make the call to your Realtor ®.
Here is a list of things you should consider when deciding if you’re ready to make the leap into home ownership.
Are you Financially Ready?
Simply wanting to own a home isn’t enough to allow you to own, you have to be financially ready as well. There are several sites online that will allow you to compare the costs of buying in comparison to what your current rent is. This will allow you to see how long it will take before the costs are equal to show you the break even horizon. One way that this can help is to see how long it will take for you to break even. If you can see yourself living in the same place for that many years then it makes financial sense to buy right now. If you don’t think you’ll stay settled that long then you may want to continue renting for a bit longer.
How Much can you Afford?
When you buy a home you’ll need to have enough money for a down payment, a monthly mortgage and other costs each month. Factor this in for the next 5-25 years depending on your loan and how long you plan to stay in the home.
The Down Payment
Your down payment will be paid up front in one lump sum, this will fund the equity in the home and let your lender know you’re ready to be a homeowner financially. The actual number can vary depending on the lender but typically between 3 and 20 percent is accepted. Many experts suggest that a down payment of 20 percent will get you the best rates in many cases. Keep in mind that if family or friends offer to help with the down payment to take it as a gift instead of a loan because lenders can add this to your debt-to-income ratio, which can’t top 43 percent. This can hurt your qualification for a home loan.
The Mortgage Payment
The mortgage payment will be paid each month and includes the loan principal, interest, homeowners insurance and pro-rated property taxes. Lenders will want to make sure that you can afford to make this payment, are employed and are what they deem credit worthy before they will approve a loan for you. This means you need to know how your credit score and reports stand. Be sure to correct any errors or issues early, have proof of your employment and proof that your bills have all been paid on time.
Can you Handle the Commitment?
Home ownership comes with a great deal of decisions and responsibilities, as well as commitment. Are you ready and capable of a long term financial commitment? You will be choosing an agent, lender, neighborhood, schools if you have children and yes, even paint colors. These are just a few of the decisions you’ll have to make. Can you give up your free time and devote attention to maintaining all aspects of the home, down to the weeds and the gutters? While you lived in an apartment or condo these are likely things you didn’t have to deal with so it can be a big adjustment. Owning your own home is an investment into your future, one that you’re going to be proud of. Only if you are willing to put in the time to maintain it. Decide if you’re ready to make this leap into responsibility before you call your agent.
Are you Handy?
How handy are you? While you are renting you typically can call a landlord or maintenance man for any issues that arise in your home at no additional cost to you. Once you own a home that’s no longer the case. If you call a repair man for every sound, smell or broken appliance you’ll be broke within a year. There are several things that every homeowner should know how to do themselves and many are fairly easy to learn:
- Find and shut off water valves for indoor and outdoor faucets
- Locate and change the A/C filter
- Change a toilet flapper
- Clean debris and leaves out of the gutter
- Change the smoke detector batteries
- Find studs to hang shelves and photos
- Paint any room
- Locate the breaker box and flip breaker switches
There are a multitude of home repairs that most people can figure out how to do on their own but these are just a few basic skills. Knowing them can save you from calling in a maintenance man for something simple. You can find several online resources to help you learn how to perform many of these tasks as well like DIY videos on YouTube. Here are a couple of my favorites:
If you can confidently answer each of these questions you may be ready to make the jump into home ownership.