Many first-time homebuyers spend months, if not years, mulling over the question “Are we ready to buy a house?” Whether it’s the complicated buying process or the significant financial commitment tied to homeownership, the hesitation to pull the trigger is understandable.
Here are four tell-tale signs that you’re ready to take the plunge into home ownership:
1. You’re ready to settle down
The first sign that you’re in the right position to become a homeowner is that you’re ready to put down roots — at least for a little while. Conventional wisdom states that in order for your purchase to make financial sense, you should plan on staying put for at least five years.
According to Bankrate.com, this time allows your home to appreciate and build enough equity to offset the money you spent on closing costs on the home’s purchase as well as agent fees associated with selling the home. Essentially, waiting at least five years before selling your home increases your chances of breaking even or making a profit in the sale.
When you start to seriously consider buying a home, ask yourself the following questions:
- Can you see yourself staying at your job for that long, or will you be looking for new opportunities?
- If the right position came along, would you be willing to move for it?
- Do you like the area you’re living in, or would you like to explore other options?
- Do you see your living situation changing soon?
- Are you planning on moving in with a significant other or expanding your family?
If any of these questions make you uneasy, you may want to consider renting for a bit longer or thinking about a for-a-few-years home vs. a forever home.
2. Your finances are stable
Let’s face it, becoming a homeowner is expensive.
You’ll not only need to consider the monthly mortgage payments (which will likely be more than your current rent), but you’ll also need to take into consideration the funds you’ll need to make a down payment. There’s also the matter of paying for closing costs as well as any necessary repairs.
Tools like online mortgage calculators or our guide to determining how much home you can afford can help you get an idea of what your monthly mortgage payment could be based on estimated interest rates, down payment amounts and income.
You can start by setting a maximum amount you’re willing to pay for a home, then, work towards saving a down payment. The amount of your down payment could vary based on the type of financing you intend to use. If you plan to purchase your home with an FHA (Federal Housing Administration) loan, you’re generally only required to put down about 3.5%.
For those buying with VA loan (which is backed by the U.S. Department of Veterans Affairs), there is no down payment requirement. For most other conventional loans, you should expect to put down 10%-20%. Please note that some conventional lenders might require PMI or private mortgage insurance if you down payment is less than 20%. No matter how you finance, the sooner you start, the sooner you’ll be ready to shop for a home.
3. You’re ready for more responsibility
Yes, owning a home means you’re free to do things like upgrade your kitchen or put in new hardwood floors; however, with great renovating power comes great responsibility. As the owner of a property, you’re solely responsible for its maintenance and upkeep.
Are you willing to roll up your sleeves and tackle home maintenance issues that arise? If you’re less handy, you may want to take some time to familiarize yourself with common home maintenance tasks before committing to buying anything. Still not thrilled about the prospect of being solely responsible for the upkeep of a home? Consider a shared living arrangement like a co-op or condo where you might have the option of paying maintenance fees to take care of upkeep rather than handling it yourself.
4. You know what you’re looking for
You don’t have to have every single detail mapped out (in fact, it’s preferable that you leave some room for flexibility in your home search), but it’s important to have a general idea of what you’re looking for in your home.
Think about your deal breakers; the things you can’t live without. These could include location, number of bedrooms and bathrooms, external features like a backyard, or nice views. Pro tip: Once you’ve decided what your must-haves are, it’s a good idea to remain flexible on any other, less important features.
So, what’s the verdict? Think you’re ready to buy your first home?
This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.