Are you ready to become a homeowner? Find out by checking our 10-point checklist before making your purchase.
There are two things that you need to be able to say you’re ready to buy your first home: the funds and the desire. You could have been ready to take care of your very own home for most of your life, but if your wallet and bank account say no, you’ll have to pull the brakes on the fantasy. Alternately, you might have enough money to buy even two houses right now, but if you can barely take care of one rental, don’t get too confident that you’re prepared to be a homeowner.
To find out if these stars have lined up for you and it’s time to move up from home renting, we’ve put together a checklist to help you decide.
You know you’re financially prepared if…
1. You have a sizeable amount saved up
The down-payment, which is normally 20 percent of the cost of the property, is just one of the things you need to be financially ready for. There are a lot of other fees involved in buying a home, such as the documentary stamp tax, transfer fee, and registration fee, plus the cost of moving. And on top of the monthly amortization if you buy a home using a loan, you’ll be paying real property taxes too. If you’re living in a condo or subdivision, you need to think about homeowners’ association dues as well. And don’t forget home maintenance and repair costs, your family’s basic needs, and your emergency fund.
2. You’ve been pre-approved for a mortgage
A mortgage pre-approval gives you an idea of how much you can loan, which then lets you know what kind of properties you should be looking at in terms of price. Checking out homes that are way beyond your budget wastes time, so having a pre-approval makes sure you only focus on ones you can actually afford. Scope out reputable banks with the best loan offers and get pre-qualified to get an estimate of how much you can borrow. Then get pre-approved to find out the loan terms, type of loan, and interest rates that will suit you the most.
Getting a mortgage pre-approval will help you determine the right property to buy.
3. You have a good job
When you apply for a home loan, one of the things they look for is your ability to pay them back, which is why one of their requirements is for an applicant to have a stable source of income. This ensures that you won’t miss the monthly payments, especially if you’re locked into a loan term of 20 to 25 years. If you’re holding a steady job in a secure industry, you’re on your way to being prepared to take on the financial responsibility of home ownership.
4. You’ve got control of your debt
Do you currently have a car or business loan? If you’re doing a good job juggling them, you’ll find it easier handle a home loan. Also, keeping your debt low might make it easier for banks to trust your ability to pay off a mortgage. If you’re constantly falling back on payments, you’ll want to take some time to clear your debt or at least lessen them significantly. Besides, even if you do get approved for a mortgage, if you think handling one or two loans is hard enough, imagine what it’ll be like if you add one more to the mix.
5. You’ve got good business sense
A lot of homebuyers don’t just look at a home’s advantages from an end user’s point of view. If you’re the kind of person who likes to think like an investor too, you’ll know what makes a property attractive to a potential buyer if you plan on selling it eventually. Have you considered the number of bedrooms and bathrooms it has, how coveted the property’s neighborhood is, and any future development plans close to it?
You know you’re emotionally ready if…
1. You’ve found the perfect neighborhood
When a neighborhood is right, it makes you feel like growing roots right there. Some of the signs of a good neighborhood are its proximity to business districts, essential establishments, and institutions; safe surroundings with a low crime rate, a location with low risks of flooding and earthquake damage, and a generally clean environment. If you’ve found all of these, then you ought to begin looking for a home right then and there, especially if you have plans on starting a family soon.
2. You’re prepared to be your own landlord
As a renter, a leaky faucet or a deteriorating roof needs only one phone call to the landlord to get it fixed. Not only does this save you money from hiring a repair guy, but it also keeps you from having to do it yourself. As a homeowner, you only have yourself to turn to for repair and maintenance work. Only when you’re ready to take on the challenge of doing these tasks yourself or shelling out money for professional maintenance work, can you say you’re ready (at least in this aspect) to own a home.
Without a landlord to rely on, you have to be ready to do your own home repairs as a homeowner.
3. You’re planning on staying put
If the chances of you being relocated due to your job are slim to none, you’ll find it easier to stay at a certain place for years, which is exactly what you need if you’re going to buy a new home. Consider this, if you purchase a home and renovate it to make it your own and suddenly decide to sell, there’s no guarantee you’ll get back the money you spent on improving it, and if you’ll be able to sell it quickly to begin with.
4. You’re flexible
When buying a home, time can be an ally or a foe, depending on how much of it you have. If your lease is only a few months away from ending or you’re currently living with your family, it would be easier for you to pack up and leave. If you just started a two-year lease, you don’t want to get in trouble for trying to break your lease agreement, so it probably wouldn’t be a good idea to buy a home. Alternately, buying a home when you only have a month left in your rental space is not at all practical; a lot of time and effort goes into finding a home, getting a loan, and closing a deal. And if a sale doesn’t push through, you’ll end up with no rental and no new home.
5. You’re not being pressured into it
You’re more likely to make a buying mistake when you’re caving into someone else’s expectations. You’re the one getting saddled with the payments, not them, so don’t give in just because your friends or people your age have done it. But if you’ve ticked all the boxes and added up all the numbers, and you feel in your gut that you’re ready, you must be. If nothing’s stopping you from taking the plunge, you can confidently move on with your purchase.
Getting ready to be a homeowner can take some time, but the rewards are worth it.
Having your own home means reaping the rewards of your hard work, so you want to make sure you’re completely prepared for it. The whole process will be lengthy and (at times) stressful, but if it means buying the home you love at the right time, it will be worth the wait.
Sources: bankrate.com, businessinsider.com, imoney.ph