Are You Ready to Buy a Home?
This article is from our friends at LearnVest, a leading site for women and their money.
Whether or not we feel ready to own our own home, we wonder out of curiosity: Could we? Nowadays, more and more singles, especially women, are buying real estate.
There are plenty of good reasons to own your own home—there’s no landlord to complain if you paint your bathroom blue, for starters. Nonetheless, homes don’t always rise in value, and you’ll be on your own whenever you have a clogged sink.
Whether you’ve still got that dorm mentality or are starting to flip through the real estate section, watch out for the six telltale signs that you might be ready to buy.
1. You Can Afford to Pay 5% to 10% in Cash
“There are ways to buy a house without putting much down,” says Alison Rogers, New York real estate agent and author of Diary of a Real Estate Rookie. But, she doesn’t recommend it. “It’s not good for you to think that your house is free; you want to have some equity in it from the very beginning.” Although some lenders will grant loans with anywhere from 3% to 20% down, wait until you can put down at least 5% (and preferably 10% to 20%) of the price in cash. “If you don’t have that much of a cushion you can get into trouble, as we’ve seen with the housing crisis.”
2. Your Debts Are Under Control
Mortgage providers estimate your home-purchasing power to be roughly 45% of your income each year, minus whatever you're already paying on other debts. Take stock of your other debts and when they’ll be paid off. Then, estimate how much you’re comfortable borrowing, using 45% as an absolute limit—we’d like you to keep your total debt payment to less than 35% of your income. Use this calculator from Ginnie Mae to find out what sorts of homes are feasible for your income level.
3. You Have a Reliable Income
Once you commit to a mortgage, you need to be able to pay it. “If you buy as a couple, one of you has to be really settled in to your job. If you’re single, you have to feel settled or readily employable,” Rogers says. If you’re contemplating grad school or a career change—which will likely require spending money, taking a cut in pay, or leaving your job—or you work in a field that’s having a lot of layoffs, you might want to keep your savings available and your overhead low for a while.
4. You Know Who Might Be Living With You
More than half of all first-time buyers are still in their homes 12 years after moving in, according to the National Association of Home Buyers. Aim to buy the house you’ll need in the next 5-7 years, not just the house you need now. “If you’re single, is there room for a partner to move in with you? If you’re married, is there room for a child? Or for an aging parent, if that’s a possibility?” Rogers asks. If you genuinely have no idea of what you’ll need for the years to come, or if you can’t afford that much space, hold off for a while.
5. You're Willing to Take Care of a House
“The care and maintenance is always the biggest surprise for new owners,” Rogers says. “You spend the first few years fixing things that are broken and you’re so house-poor you don’t buy any new furniture until year three,” she continues. “Then, at some point you start renovating things that work because stuff is out of date and you want to update it.” You’ll need the determination to do it yourself or the room in your budget to call the plumber, carpenter, exterminator, roofer, or other professional when things go wrong.
6. You Don’t Have the Urge to Live Elsewhere
“You don’t want to be in a situation where you have a short-time horizon, prices have plummeted, and you need to sell,” Rogers advises. So, if you think your work, romance, or plain wanderlust might make you want to move sooner rather than later, stick with your rental.
In the meantime, keep stashing money away so that, when you’re ready to buy, you’ll have the financial cushion to do it right.
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