The decision to buy a house is a big one. It’ll impact your life in many ways, from your monthly budget to your daily routine. So, before you head down this path, you must be 100 percent confident in your decision.
By answering these five questions, you’ll gain a better understanding of your circumstances and if now is the time to buy a house.
1. What is your current housing budget?
If you’re currently paying for housing — even if it’s rent — you can easily answer this question. You can also determine how comfortable you are with your current budget. This helps you decide how much you can spend on a new home.
2. Have you saved enough money for a down payment?
Gone are the days of buying a home without a down payment. In today’s world, 20 percent down is standard. It’s not always required, but it’s a good goal to set for yourself.
If you don’t have a large enough down payment, it’s often best to put off your purchase until you do. This improves the likelihood of securing a mortgage at a competitive rate. Not to mention the fact that 20 percent down allows you to avoid paying private mortgage insurance.
3. Do you know what you’re looking for in a home?
This is all about ensuring that you spend your money wisely. It’s easy to get excited about your home search, but don’t let that cloud your judgment. You must know what you’re looking for in a home, such as the location, number of bedrooms, and age.
4. Will you qualify for a mortgage?
Unless you’re paying for your home with cash, this is one of the first questions to address. Start by reviewing your credit report and credit score. If there’s anything you can do to improve in these areas, take action now.
From there, contact several lenders in your search for a pre-qualification. Once you’re pre-qualified, you’ll know the max amount of money you can spend.
5. Are you financially stable?
Financial stability is a big one. For instance, if you have concerns about losing your job, you don’t want to take on a new mortgage payment. The same holds true if you’re buried in debt and have been working hard to dig yourself out.
A thorough review of your budget and overall financial circumstances can help you determine if you’re on stable ground.
At this point, you should feel more confident in your ability to make a sound decision. You should be able to determine if buying a house now is a good idea or if it’s better to wait. From there, you can create an action plan and take the first step.