Many people dream about living in a more spacious home, one with a nice sized yard where they can relax and entertain. At the same time, they think about the financial benefits of building equity in a home instead of paying rent to their landlord. If you are seriously considering buying your first home, you may want to ask yourself the following questions to determine whether you’re ready:
Can I Afford to Buy a Home on What I Make?
The most obvious consideration has to do with money: can you afford to do this? Purchasing a home is a major financial investment and commitment. Most buyers need to obtain a home loan, which requires them to make mortgage payments for decades. However, owning a home just might be more affordable than you think. In fact, if you’ve been a reliable tenant, renting for years, you could be well on your way.
Have I Saved Enough for a Down Payment?
If you’ve done the math and are confident that you can cover the monthly mortgage payments, then the next hurdle is setting aside enough money for the down payment. This is the initial cash investment that must be paid down on the home when the deal is closed. The balance of the purchase price is paid by your lender, who you will be making your mortgage payments to. The typical down payment is 20% of the purchase price, however, there are several assistance programs that may help reduce this if you are a first-time homebuyer. In many instances, first-time homebuyers are only required to bring 3.5%-5% of the purchase price. Also, consider other closing costs that may factor into the purchase. If you're unsure of what these additional costs might be, ask your mortgage broker to provide you with a basic idea of what you can expect.
Have I Figured Out Which Type of Home Will Best Meet My Needs?
Once you’ve got your finances worked out, it’s time to decide which type of home will work best for you. If you’re young and single, a house may be more than you need, so an apartment or condo might be perfect for now. You can always upgrade down the road. Or if you have pets, you might prefer a small house with a yard.
Am I Ready to Settle Down in One Neighborhood?
At this point, you need to decide whether you’re ready to commit to living in a particular neighborhood for the foreseeable future. Do you have a stable job or career, so you’re confident that you won’t have to move in the next few years? Do you have a partner or spouse you need to consider? What about children, now or in the future? All these factors must be considered in determining which neighborhood would best meet your needs.