The reality is that many people never become homeowners. Buying a home, which often involves committing to significant mortgage debt, is a big financial responsibility that spans multiple decades. It is simply not for everyone. This is in large part why renting is a very popular and convenient option for many people. So how does one decide whether homeownership makes sense? It is clearly a personal decision, and everyone’s situation is different but in the following sections we discuss 3 signs that could indicate that you’re ready to buy a home.
1. You Have Employment and Life Stability
One of the risks with buying a home is that a typical mortgage loan is for a 30-year period. Most people move many times during their lives for a variety of reasons including job changes and relationship changes. Therefore, committing to living in a property for many decades simply does not make sense. One of the signs that you’re ready to buy a home is if you’re at the stage in your life that your employment situation is stable as well as any relationships you might have. This doesn’t mean that you know for sure that you want to live in a particular town of city for the rest of your life, but at least for several years. According to the National Association of Realtors, in the United States homeowners stay in their homes on average for 13 years! It’s generally recommended to avoid buying a property if you’re unwilling to live in it for less than five years.
2. You Have Little to No Financial Debt
Very few people are blessed with zero debt. The average person in the United States will have student loans, some personal loans and credit card debt. Your debt load plays a huge role in financial planning because they hinder your ability to borrow and add stress to your day to day. Getting approved for a mortgage loan is a lengthy and stressful process. More importantly, your credit situation will impact the terms lenders are willing to provide you for your mortgage. Another sign that you’re ready to buy a home is if you’ve minimized the amount of debt you have. The reason for this is that by doing so you will have positioned yourself to get more attractive terms from your mortgage lender. In addition, you also won’t have to worry about repaying other debts in addition to your mortgage loan.
3. You Have Liquid Savings
You don’t need a substantial amount of money to become a homeowner. Not every lender requires a 20% down payment. Various programs will allow you to purchase a house or an apartment with much less. For example, an FHA loan might only ask you to put down as little as 3.5% as a down payment. FHA loans are offered by many banks and credit unions of all sizes, including large banks such as Chase Bank and Bank of America and smaller lesser-known lenders like Bank of Holly Springs and FMS Bank. While these programs mean that you don’t have to have much saved to buy a home, a sign that your ready is if after making a down payment you will still have liquid savings. The simple reason for this is that it means you have a financial buffer which is important before committing to a mortgage loan.
Homeowner Preparedness is Very Personal
Different signs meant different things for people. Deep down, you probably have a list of goals to accomplish before you feel secure enough to buy a home and settle down. Perhaps hitting a significant milestone in your life, such as getting married and having a kid, means more to you than working on your credit score. Perhaps you’re an excellent saver and are financially knowledgeable enough to manage your debt. Certain signs are better indicators than others, but the three signs discussed in this article are helpful financial indicators that you might be ready to take this next step.
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