Homeownership offers advantages like comfort, security, and tax benefits. These are perhaps the reasons why 89% of millennials want to own a home in the future. But as exciting as homeownership is, you shouldn’t just wake up one day and decide to buy a house. That will almost certainly lead to a disaster. You have to wait until you are ready to handle the responsibilities of owning a home before taking the step.
So, the question is, how do you know if you are ready to buy a house? Well, there are certain signs that will let you know that it’s time to own a home. These signs include:
- A good credit score
- Need for control
- Ready for responsibility
1. A good credit score
Having a decent FICO score, the most common type of credit score, is the first clear sign that you are ready to become a homeowner. It shows lenders that you are in control of your debt and can pay your loan on time. It even encourages them to give you a loan with a low-interest rate.
On the flip side, a low FICO score indicates that you may not be ready to buy a house. Lenders will deem you a financial risk and may not want to offer you a loan. Even if you find a lender willing to give you a loan, the loan will come with a high-interest rate and high down payment.
Now, you don’t have to worry yourself sick if you are an aspiring homebuyer with a low FICO score. Here are specific steps you can take to improve your credit score:
- Pay your bills on time (including utility and cell phone payments)
- Ask for higher credit limits
- Dispute and clarify any credit score errors
- Keep your credit cards open
- One lesser-known tip for boosting credit is to build credit by opening a credit line with a prepaid credit card. These programs are specially designed to help individuals with low or no credit to build credit.
- Prepaid credit cards are also great at boosting credit because your on-time payments are reported to the credit bureaus every month, unlike many other credit cards.
- Lastly, you can improve your credit score by setting up automatic payments on your credit cards. Automatic payments ensure that you will always make your payments on time as long as you have money in the bank.
If you do all these long enough, you can increase your FICO score to 580 – 620 points – the minimum credit score most lenders set for their loans.
“Am I just staying in this place temporarily, or do I want to spend the next (few) years here?“
Asking yourself this question is another way to assess if you are ready to buy a house.
If you are not staying in a place for long, you should not buy a house there. It isn’t financially wise to own a home and keep up with all its expenses without living in it. Unless you are wealthy, the better idea will be to rent a place.
On the other hand, if you are tired of moving, buying a house is a great option. It will save you from the hassles of eviction or an unexpected rent increase. And more importantly, it will allow you to focus on your job and loved ones. You will no longer have to move locations or change schools for your kids.
Another crucial factor that determines if you are ready to become a homeowner is your savings. You need to have a specified amount saved before you consider purchasing a home. While no one expects you to pay for your house in full, your savings should cover the homebuying expenses.
One of the expenses is the down payment. Most homebuyers pay between 3.5% to 20% of the home’s purchase price as a down payment. With the median home price pegged at $311,800, you would need $10,913 to $62,360 saved up as a down payment to buy a house.
But that is not all. You also need to budget for closing costs and moving costs. It’s also wise to have some additional discretionary funds available for unexpected repairs in your new home after you move in. Although your realtor could negotiate a home warranty, many unexpected repairs will not be covered by the warranty.
Once you’ve saved enough money to cover these and other necessary expenses, you are ready to buy a house.
4. Need for control
If you stay in a rented apartment, you should know that you can’t make any significant changes to the place without your landlord’s approval. And most landlords usually refuse to approve changes, leaving their tenants frustrated.
So, if you’re in this kind of situation, what do you do? Well, you can rent another place or… buy a house.
Having a home of your own will give you the freedom to make the changes you want. Do you want to make some kitchen upgrades? Get it done! Want to install a pool? Go ahead and do it!
You can do anything you want to your home, provided that you have the necessary permits and a good contractor.
5. Ready for responsibility
While owning a home gives you control over your space, it comes with huge responsibilities. Put plainly, homeownership can be stressful and costly. You have to dedicate time and resources to maintaining your house to prevent depreciation.
Remember those annoying maintenance issues you used to call your landlord’s attention to? You are now totally responsible for them. You are responsible for fixing any unexpected plumbing, pest, electrical problems you come across. If you can’t fix them yourself, you have to pay reliable service professionals to do it for you.
Hence, if you are not willing to take sole responsibility for your house upkeeps, you are not ready to become a homeowner.
As some realtors renovate homes, a good realtor will be connected to qualified professionals who can help with many of these kinds of repairs, and sometimes they can even get you discounts on services! Let them be your point of contact when you need work done on your property.
Are you ready to buy your dream house?
Having an agent like Bost Redevelopment in your corner automatically increases your chances of getting the place of your dream.
Our expert team of real estate agents will help you find the house of your dream. We will also provide all the support you need throughout the house buying process. Lastly, we will negotiate with the seller to make sure you get a favorable deal.
Want to talk more about your options? Please leave us a message below with your contact information and let us know how we can help you.