Thinking of starting the adventure?
Having a home of your own is a dream for most Americans. It may be a dream you’ve always had, or maybe you’ve just grown tired of paying hard-earned money to a landlord.
Whatever the reason, the decision to buy your first home can be tough. In the end, most people find the benefits — both financial and emotional — often make the decision a worthwhile one.
But how do you know when it’s the right time for buying your first home?
Before you start the first steps towards purchasing, it’s a good idea to review your situation to see if now is the right time. Let’s look at seven signs you’re in a good situation to buy your first home.
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1. You are ready to settle down
Even as teenagers, whether due to financial advantages or making your own space, it’s not unusual to dream of owning your own home.
When you decide to buy your first home, consider staying in that location for at least five years. If the market stays favorable when it comes time to sell, five years gives you a better chance of breaking even or turning a profit.
In addition, this time allows you to build some equity into the home and potentially offset the closing costs and the legal fees.
Staying longer can give you the opportunity to pay off more of your mortgage, and owning the home outright can cut down living costs significantly.
2. You are ready for the responsibilities of owning a home
Next to raising a family, owning a home is one of the most significant responsibilities a person can take on.
Between repairs, upkeep, bills, and improvements, the list of things that need doing never seems to end.
Each of the items you check off that list above can give you a sense of maturity and stability. Owning a home also contributes as much to the overall economy as it does to your personal well-being.
3. Your finances are stable
Submitting your mortgage payment on time every month is crucial to homeownership. So what should your finances look like when you’re ready to buy a house?
A good credit score
Scoring over 720 is excellent. But even if you have a lower score, it’s still possible to work out a solution. Paying your bills on time is essential.
Little to no debt
Lenders will look at your debt-to-income ratio when qualifying you for a mortgage. Debt can also affect your credit score, so it’s important to pay as much of it down before you apply for a home loan.
A stable job
Having the peace of mind of a steady income stream makes the whole process smoother and less stressful for everyone. Lenders will also look for you to have reliable income.
Sudden expenses can crop up when you least expect them—having a rainy day fund is recommended for when emergency repairs or replacements are needed. Then you won’t have to worry about paying for that and making your mortgage payment.
Depending on eligibility, 3 to 20% of the purchase price is the general amount you’ll need to have immediately available.
Once you’re confident your finances are secure enough, you can look into getting a mortgage.
4. You understand the process of home buying
You can help reduce the risk of unexpected delays and roadblocks if you understand what to expect in the home buying process.
Prepare your checklist of things to attend beforehand and have it readily available throughout the process. There are even some handy, ready-made checklists for first time home buyers available to review how to navigate the process.
5. You know an area you would like to stay in
The real estate mantra of ‘location, location, location’ has endured for a reason. Many elements of your home’s area can affect you in ways you may not have even considered.
Do you want to stay near extended family members? If commuting to work is an issue, your location to travel routes or public transit can significantly factor. Will you be walking your dog regularly? If so, do you feel comfortable walking these streets at night? Do you get a joyful feeling from the area?
Explore the areas you are considering, preferably in person or, at very least, virtually. See what resources and amenities (libraries, gyms, supermarkets) are located there — and think beyond the immediate.
For example, if children might be in your future, school districts or bus routes can be an important consideration.
6. You know what you are looking for in a home
Investing significant time exploring what’s available in your preferred area is a great sign that you’re ready to buy your first home. What types of homes are available? For example, narrow your choices down to a ranch style, two story, or even condo.
If you plan to expand your family in the near future, you may need more bedrooms. If you need a lot of light for your favorite houseplants, consider which rooms are south-facing and the condition of the windows.
Create a list of “need to have,” “like to have,” and “cannot have” for your home beforehand. Check what’s available in your area, compare it to your list, and see how that lines up with your financial situation. If your needs and wants are in balance with your means, you’re in a good place.
7. It feels like the right time
Although a decision as important as buying a home should never be purely emotional, you should also consider your gut reactions. Being emotionally prepared to take the first steps towards homeownership is an excellent foundation for your future.
You’ve considered your finances, explored neighborhoods, feel comfortable with your employment situation, and find yourself saying things like, “The timing feels right?” Chances are you’re ready to buy your first home.
If you think you’re ready to buy your first home, get in touch with a licensed loan officer at River City Mortgage. We can help you with pre-approval and taking the first steps to buy.
Our passion is first-time homebuyers. We can sit down with you and review all the options available for making your first home a dream come true. If there is the right mortgage product for you and your family, we can help you find it.