March 1, 2018
March 1, 2018
Even though there has been talk of millennials shying away from buying homes in recent years, the reality remains that owning a home is still considered a major life milestone in our society.
However, just because you might feel that buying a home is the next logical step in your life, it doesn’t mean that you’re ready. Before you make such a huge financial and lifestyle commitment, make sure that buying a home is the right move for you. Here are some of the signs you’re ready to buy a home:
Buying a home isn’t just a big financial commitment. It’s also a lifestyle choice. You pretty much acknowledge that you’re not going anywhere for at least a few years when you buy a home. If you think you’ve found a place you want to stay, it can make sense to buy.
Think about what you like in your current home base, and consider whether you’ll still like it years from now. If you decide this is where you want to live long-term, buying can make sense.
You don’t have to be completely debt-free to buy a home. However, there shouldn’t be a lot of debt on your plate when you buy a home. High-interest consumer debt obligations can make it harder to meet your home loan payments.
Before buying a home, make sure you have credit card debt paid off. You also want to be careful about car loans you have. Student loans aren’t as big a concern, as long as the payments are manageable. If you have paid off most of your consumer debt, that’s a sign that you can handle sticking to a plan, and that your finances are on a pretty good footing.
Part of knowing you’re ready to buy a home is when you can be practical about it. Try to keep your housing costs to between 25% and 30% of your after-tax monthly income. While it can be tempting to buy a bigger, more expensive home just because someone has agreed to give you a loan, it’s not the best choice.
Additionally, part of this is saving up for a down payment. While you don’t need to wait until you have 20% to put down, at least saving up 5% or 10% is a good indication that you can make financial plans and stick with them. Plus, a down payment reduces what you end up borrowing.
If you can show money self-awareness and discipline, that’s a sign you’re probably ready to make such a big financial commitment. Plus, you’ll end up less likely to feel house poor when you are careful about what you buy.
Taking care of a home is more than just making payments. You need to be ready to take care of maintenance and repairs. Can you keep the home clean? If there’s a yard, can you maintain it? Are you prepared to fix things that go wrong, or know when to call in a professional to handle bigger problems?
There’s a financial aspect to being prepared as well. Experts suggest that you need to plan to spend about 1% of a home’s purchase price each year for maintenance and repairs. So if your home cost $170,000, you need to plan for $1,700 in maintenance and repair costs each year. It’s true that you might not spend that in the first couple years, but as homes age, they have more problems. Set money aside to care for your home, and keep up with maintenance and repairs to avoid major problems later.
Finally, you are ready to buy a home if your lifestyle priorities and choices work better in a home. For example, if you plan on growing your family, or if you like to be able to make changes to your living space, a home can make sense. When you have pets, a home often makes more sense than an apartment.
And, if you can afford it, buying a home can provide stability for your family, pets, and projects. If that’s what you’re looking for, and you are ready in other ways, it might be time to buy a house.