Choosing when you're ready to take the plunge into homeownership is a very very important decision and shouldn’t be taken lightly. I’ve taken a moment to compile some questions you could & should ask yourself ( & be honest about ) so you are able to make these big decisions and feel good about them!
Of course, the first question to come up when deciding to purchase a home is money, money, money. Do you have the funds to purchase a new home? Even if you can't pay in cash, most experts would agree that you can afford the purchase if you can qualify for a mortgage on a new home along with a couple other stipulations. Not only do you need the funds but you need to make sure your financials are together in alllll aspects. If you are ate up in debt and can’t seem to keep due dates separated and you are adding hundreds a month in credit card debt and you aren’t paying off more than you are adding to the debt monthly, then you may not be financially free enough to start this process. That debt is a symptom of a greater problem: not enough money. If you are forced to use a credit card because there seems to always be more month than money, this is probably the sign for you to not buy a house.
How about your credit? Are you rocking an 820 credit score, or is it closer to a 620? Your credit score is the number a bank uses to determine how well you handle credit. If your credit score is terrible, it’s probably because you handle credit terribly or (…. let’s be honest for those I’ve hurt some feelings) haven’t done so hot with credit in previous years. That’s okay, it doesn’t mean you will never own a home or that you’ll never turn your credit around or understand these things, it just means you should get serious about it now and research so you can know what to do better!
How about auto loans, student loans and other personal loans? Yes friends…. These count too! You don’t want to be broke come 6 months from now because you decided to buy that home before paying anything else off and now you’re only making minimum payments on credit card bills and you can’t afford that new duvet bed spread you were wanting to put on your bed in your new home. If you're saving money every month, that means your cash flow is in good shape, which is a good sign you're ready to buy a home," experts say. If you can't spare anything more than the mortgage payment, consider putting off purchasing a home until your cash flow is more stable due to unforeseen things that could ( & will ) arise in the future.
Another money subject this brings me to is whether or not you even have a down payment saved up. People's situations are different and some only have to have a 0-3% down payment and others it may take 20% down. If this isn’t something that you’ve thought about beforehand, or maybe you don’t have any kind of savings to spare towards a down payment on your home then you may not be in the situation to start thinking of buying. Your down payment on your first home will most likely be the single largest investment you’ve ever made. But you also can’t forget about the closing costs, taxes, and insurances needed and money for repairs and furnishings to turn the house to a livable home. These costs will easily add thousands of dollars to your bottom line if you aren’t prepared and careful. ( Or if you don’t have an awesome REALTOR to explain these things to you ;) )
We’re just going to go ahead and rip all of the cost/ money portions of this blog off in quick swipe… similar to how we do children when they have a booboo & a 10 day old bandage that doesn’t want to come off ;) Let’s talk more about these savings we keep saying you need to have. Savings can mean a lot of things…. Previously I mentioned you needed to have a down payment saved, as well as closing costs and taxes/ fees/ insurances. As well as a good handle on paying off new and reoccurring debts. BUT friends, you also need an actual savings. By savings, I mean, a separate emergency fund. (NO! This isn’t cash to go towards your Lowe’s credit card or your down payment!!!! Hands off! Swiper no swiping!) If you google how much you should have in an emergency fund the rule of thumb will always be three full months worth of expenses. This is in case you were to run across some kind of emergency and you have no other way of making payments or an unforeseen bill. This money is to be kept at all times and not to be spent anywhere else. If this is the first time you’ve seriously thought about one of these then maybe it’s not the time for a home purchase, maybe we should focus on getting you more set up for the future so you are better equipped when the time does come for you to become a home owner! This next question I have for you may make you giggle, but if you don’t have this here emergency fund, then when this happens to you, instead of you giggling you will for sure be S W E A T I N G…….
Can you or grand-dad fix a leak?? I wish I could say I was being silly in usual Syd fashion, BUTTTTT take it from someone who has had many small catastrophes in my first year of home ownership as well as watching many loved ones go through stuff quite similar. If you can fix things yourself, you can save on the labor but the material costs can still wreck havoc on your savings. A new dishwasher isn’t cheap. A leaking pipe isn’t cheap, A NEW PRIVACY FENCE… NOT CHEAP! These little surprises are allll a part of home ownership, and you should be prepared for them both financially and psychologically that way you aren’t blowing your own gasket trying to get these odds and ends worked on when they just so happen to rudely take a crap ( maybe even just a week after the home buyer’s warranty ended, I've seen it happen! ) on you. This is another reason a savings account is much needed, just because Gramps is happy to fix the heating coil in your heating element doesn’t mean that Gramps wants to pay for it!
Another quick tidbit I just want to mention because I feel it’s also important is whether or not you are planning any other big expenses in the next few years. Are you driving Gramp’s 1940’s pick up truck that was also his first vehicle and it’s nearing time for it to take its last spin on the interstate??? Maybe it won't even make it to the interstate? Maybe the reason you are thinking of home ownership is because you and Linda Sue are getting super serious and you’re thinking maybe it’s time to get down on one knee and talk about a family?? Either way, if it’s not in your cards to shell out big bucks sooner than later or you feel other things may need to come first before putting 10% down on some land that you aren’t sure Linda Sue loves enough to stay in TN for another couple years then that’s A OKAY! Maybe her big wedding or a new Camaro is more important for you to have in the next couple of years and you are content renting for another two years, that’s GREAT. Do what’s best for YOUR family and seriously y’all…. Don’t worry about what everyone else is doing and trying to keep up. This leads me to my final topic…
This last little coming to Jesus I have for you is also so very important, this is a question to ask yourself and to really dig deep and see where you see yourself in the next 4-8 years. Are you really ready to settle down? Is having your own home something that resonates deep down with you or is Linda Sue nagging you to move the relationship to the next step and you are feeling rushed and maybe NONE of this was your idea? Buying a home is no task that should be taken lightly. ( I've repeated this and will continue to ) If you don't plan on staying long term then you can actually do more damage than not, specially if this is your first time and you don’t necessarily know your way around the real estate world. Home ownership, like stock investing, works best as a long-term proposition," Pollack and Olen explain (Writers of The Index Card: Why Personal Finance Doesn't Have to Be Complicated, a personal finance book). "It takes at least five years to have a reasonable chance of breaking even on a housing purchase. For the first few years, your mortgage payments mostly pay off the interest and not the principal."
And there you have it, a cut throat list of questions that you really should sit down and ask yourself honestly so you are able to make the best decision that will fit your lifestyle. Maybe this is helping you realize the lifestyle you are following isn’t going to get you where you want to be either, and that’s great! You literally do not know, what you don’t know so don’t take it personally, just make a plan to be better! That’s my goal with all of these blogs I’ve committed to writing you all, I want to give you all of my knowledge and be an asset to every one of you and your lives! Please reach out to me with any questions, or maybe you want to dig a little deeper and see if buying is in your near future, LET’S CHAT FRIENDS!
Have a great week! - Sydney