Are you ready to buy a home?
Homeownership: Are You Ready?
Most people dream of owning their own home but buying and maintaining a home is a long-term commitment. We’ve compiled this list of things to consider before you take the first step towards homeownership.
Is it a good financial decision?
The main decision you need to make before you buy a house is whether not it makes financial sense. If you are going to stay in your home for the long term, buying is usually the best way forward. If you think you will be leaving your home very shortly, it may be cheaper to carry on renting. Whatever you decide must be right for you; when it comes to buying a home, taking on a mortgage or loan, or dealing with real estate it is a very personal decision.
Do you have the money?
To buy a house you will need to raise a down payment as well as paying the monthly mortgage costs. A mortgage is a long-term financial commitment, usually lasting from 5-30 years. There are a few other costs involved with house-buying but these are the 2 largest to be considered:
Finding the down payment
The down payment is required by the lender to show that you have raised some equity in the property and are invested and committed to owning your own home. The preferred amount for a down payment is 20% and this is what will get you the best rates, however, this is flexible and some lenders will accept down payments or around 3%.
Sometimes a home buyer can fund the down payment with loans or gifts from friends or family. If you have the opportunity of a financial gift then use this to cover the down payment rather than a loan. Any loan, even if it is from a family member, will be used when the lender calculates your loan and it could make all the difference to your debt-to-income ratio which must be under 43%.
Meeting the mortgage payments each month
The mortgage repayment includes interest on the loan as well as the loan principal plus it often adds on insurances and property taxes. In the past, you had to have a good credit rating to apply for a mortgage but this is now more relaxed. However, you will still need to be employed, responsible, and creditworthy for a lender to consider your application.
Consider your emotional readiness
Homeownership means being able to take a lot of important decisions; anything and everything from the neighborhood where you will be living, the type of property, selecting a real estate agent, and even choosing paint color and carpet.
A home needs a lot of time and energy as well as financial investment and weekends will often be taken up on routine maintenance and all the chores that are part of taking care of a property. This is your biggest investment so although it can be difficult, owning a home can also be very fulfilling.
Do you have basic maintenance skills?
Once you own your own home you are responsible for the maintenance and repairs. You no longer have the option of calling your landlord and constantly hiring people to carry out routine or basic tasks can prove expensive. Before you buy consider looking at developing some of these key skills:
- Disconnect water valves and faucets
- Gutter clearance and maintenance
- Finding studs in walls for hanging shelves
- Test smoke detectors and change batteries
- Changing furnace filters
- Changing toilet flappers
- Dealing with breaker switches
- Painting, decorating, and other small household tasks