Here are five helpful questions you can ask yourself to determine whether you’re ready to stop renting and buy a home:
1. Do you know how much you can afford? There are a lot of great online resources you can use to calculate a ballpark figure. Using an online mortgage calculator, for example, is a great way to find out what a mortgage will cost you. Keep in mind how much of a change this cost will be compared to your current living situation.
2. Do you have the down payment amount available? It’s a myth that you must put down at least 20% to buy a house. In fact, there are plenty of mortgage options out there that go as low as 0% financing. However, you should know what you are getting into when you agree to a mortgage loan and how your down payment amount will affect what your monthly mortgage costs. For example, the more you put down, the lower your monthly costs will be.
3. Will you have enough money left after closing? Make sure you are not completely liquidating your savings in order to buy your house. I recommend having three to six months’ worth of savings in reserve after you’ve covered your down payment and closing costs.
4. Is your credit in good shape/What does your debt look like? These questions refer to the conversations you’ll have with your lender before starting the pre-qualification or pre-approval process. If your credit is not in great shape and you have a high amount of debt, that will probably limit your purchasing power, so get these items sorted out first. A good lender will be able to help you do this and present you with strategies to either bring your credit up or reduce your debt load.
5. Where do you see yourself in the next couple of years? If you only plan on being in a particular area for a year or two, buying might not be the best option for you—you might still prefer the flexibility of renting. However, it is a good idea to do a cost-benefit analysis to know for sure. If it is going to cost you $1,500 to rent for two years but it will cost you $1,200 to buy a house, that might even things out. It all depends on what your investment in the property is going to be. If you plan on being in that area for three to five years, it definitely makes sense to go ahead and buy a home.
If you have any more questions about this topic or are thinking of buying or selling a home, please feel free to reach out to me. I would be happy to help you