How to Know You Are Ready For Homeownership
Owning your own home is a big part of realizing the American dream. However, trying to buy a home before you are ready can turn this dream into a nightmare. Thankfully, there a few indications you can look for that reveal you are in a healthy place and are ready to embrace home ownership. Read on to learn more:
You Have a Decent Savings
In order to ensure the purchase of a home doesn’t put you into a bad financial situation, you should have at least 20% of the home’s purchase price saved for the down payment. Yes, you can qualify to purchase a home with much less as a down payment. In fact, FHA mortgage loans will approve you with as little as 3.5% down. However, paying 20% down means you don’t have to carry private mortgage insurance and your monthly payments are lower. You also will protect yourself from a market adjustment that lowers your home’s value significantly.
You Understand Home Ownership Involves More Than a Purchase Price
Another factor you need to consider when contemplating home ownership is the overall cost of home ownership. Your mortgage or purchase price is just one factor. You also need to account for homeowner’s insurance, moving costs to move your belongs from your current location to your new home, closing costs, property taxes, maintenance and repair costs and much more. Let’s face it, owning a home is a big responsibility. This tool by Zillow is a helpful way to determine if you are ready to take on not only a mortgage payment, but also are able to keep up with all other costs associated with home ownership.
You Can Come up With Down Payment Without Spending Savings
While paying that 20% down payment is important as mentioned above, you shouldn’t deplete all your resources to come up with this money. You also shouldn’t tap into retirement or other long-term savings accounts to get the money. You will need your savings more than ever once you are a homeowner. All the expenses mentioned above reveal this to be fact. You don’t want to deplete every resource you have trying to achieve your American dream. Instead, work towards saving the 20% down in addition to your existing or regular savings.
You Have a Long-Term Plan That Makes Home Ownership Wise
Another way to determine if you are ready for homeownership is to consider your long-term plan. If you plan on being in the same location for more than a few years, home ownership can make sense. However, if you know you will need to move for a job or other factor in a manner of one or two years, the closing costs and other expenses involved in the purchase of a home can mean staying put is the best idea. Home ownership shouldn’t be approached as a temporary living situation, but part of a long-term life plan.
Homeownership is a dream many Americans work to achieve. If you want to make this dream a reality for your family, consider the points listed above. Are you in the right place to buy a home? Sure, some things simply cannot be foreseen. However, when possible, create a long-term plan and approach homeownership in the right way to ensure you are in a positive situation when move in day arrives.