5 Ways to Know You're Ready for Homeownership
Buying your first home is a big decision, personally and financially. It’s the symbolic start to the next chapter of your life. So how do you know if you’re ready to buy your first home? Here are five indicators that you may be ready for first-time homeownership.
Your finances are in order.
“This is a great time to take stock of your finances and know where you stand. This means reviewing your on-going monthly expenses, as well as paying off debt,” said Lisa Parker, President of Dragas Mortgage Company. “Before you start searching for a home, it’s good practice to have a mortgage loan officer pull your credit to make sure there are no surprises.”
Parker recommends that anyone who wants to buy a home reduce debts, such as any sizable car payments. She also advises homebuyers to check in with a loan officer early in their search, so they are aware of any issues and have time to address them before spotting their dream-home.
“The best way to get pre-approved for a loan is to pay off debt,” said Parker. “It’s not having more income or getting a raise, which many people believe.”
Banks will use your credit score to determine if you can handle making mortgage payments on time, so it’s important to have a good credit score. Settling debt is one way to improve your credit score. If you have little to no debt and a good credit score, you have put yourself in an ideal position to buy your first home.
Your rental home is no longer meeting your needs.
As our families grow and our lifestyles change over time, so too do the things we need from the homes we live in. Some of these indicators may be obvious to you - for instance, sharing your bathroom with a roommate. Other needs, however, you may have adjusted to over time, and in that case, it’s time to reevaluate. Consider every family member, what your home does for them and where it’s falling short.
That may include your furry friends--maybe you have noticed your dog putting on a few extra pounds because he doesn’t have a yard to play in. Usually, however, rental homes simply no longer have the space you need for your lifestyle. For example, an additional bedroom may allow you space for both a new baby and an office.
Whatever the reason, once your home stops meeting you and your family’s needs, it may be a sign it’s time to consider first-time homeownership.
You know the area you'd like to live in long term.
If you moved to the area for a new job, you may have chosen a rental home in a hurry, only to discover later that it isn’t the best fit for you.
While your living situation may not have been ideal, there’s some value in that experience. When you know what you love, and can’t stand, about your rental, you start to get to know yourself, your preferences, and what your best life in Hampton Roads really looks like. You have lived local long enough to know what school district you like, where you love to shop and how close you would like to be to work in order to keep a shorter commute.
Even if your rental has become frustrating and no longer suits you, you can use that experience to guide to you the right home for you. When you are confident about where you want to be for the long-term, you may be ready to buy.
You find the best financing and down-payment options for you.
The down payment for your first home will likely be the biggest investment you’ve made to date, so it’s no wonder that homebuyers are intimidated. Keep in mind, however, that Virginia Beach was found to have the lowest down payments in the U.S. in 2018.
If you’re a first-time homebuyer, you could qualify for loans or grants that don’t require a down payment. Military families are also eligible for VA financing, which requires no down payment. The best way to find out if this applies to you is to connect with a mortgage lender ahead of time. Lenders can tell you what you can qualify for, and help you navigate the types of loans available to you.
You may need a 3 to 5 percent down payment before buying your home, or you may not need a down payment at all. There are often grant programs and financing programs available for first-time homebuyers that can account for your entire down payment, along with assisting with closing cost expenses. Working with an experienced mortgage professional that can seek out the best program to fit your needs can possibly save thousands toward your home purchase.
You’re feel confident about monthly payments.
“One way to know if you’re ready to buy your first home is if you’re comfortable with the payments you’re going to be making each month,” said Parker. For first time buyers, it can be easy to forget that purchasing a home isn’t just about making a mortgage payment each month. It’s also paying for insurance, utilities, and any maintenance repairs that may pop up.
Parker emphasized planning out a budget you’re comfortable with and then sticking to it. “You could be approved for more than you feel comfortable paying,” said Parker. “Determining a budget that feels right to you - and sticking to it - is important.”
These are just five ways to know whether you’re ready to buy a home, from the professionals. The sixth way to know is an X-factor that’s unique to every family, and entirely up to you. As a realtor, I’ve heard answers from a new job to a new dog - to simply wanting a home to truly call their own.
Sometimes it’s just time to make that big leap.