There’s nothing more adult than buying your first property. You feel like you suddenly are grown up, you now own an asset, and people keep congratulating you while also telling you your housework will never end. It’s a cool, weird moment, but it’s not for anyone at any time. If you truly want to buy a house at the best time to benefit you now and in the long run, here are 7 ways to know when to buy a house – and only buy if you can relate to all seven!
1. You have a solid savings account.
Long gone are the days of needing 20% down. Nowadays there are first-time homebuyer programs, grants, FHA loans, and a ton of other options to get your house with little down. Even so, you’ll need reserves for things like closing costs, last-minute fixes for inspection, and for the unavoidable purchases you’ll make the first few months of owning your home.
I have a great personal example for this one, as I just bought my first property a year ago. I had great first-time homebuyer assistance and ended up putting a total of only $4k to get the keys to my home. That in itself is pretty awesome, but what happened? Insurance stated they wouldn’t cover the roof so I had to replace it within two months of getting my house. That was a hefty $9k. You need reserves.
Check out: Saving $1 million is easier than you think
2. Your credit score is solid.
You can get a house with shoddy credit, but you’ll get a shoddy interest rate and sky-high monthly payments. Plus, then your credit score will drop even lower once you have your mortgage. Bump your score up as much as you can and pay down any existing debts before applying for one of the biggest loans of your life.
If you’re having trouble getting your ducks in a row for home buying, follow up this post with another one we made called, “I Can’t Get Motivated – What Do I Do?” I hope it helps you out.
3. You’ve done your research.
You need to research three main topics before deciding to buy. The first is the area – are there any municipal projects that are starting? Are you near a school, gas station, train tracks, or subsidized housing? What’s the neighborhood rating? All of these things will affect your home’s price now and whether or not it appreciates moving forward.
Second, you should research housing prices in your area. If you’re looking for a 2-bedroom 2-bathroom, for example, look at other homes with those constraints. These are called comps and that’s how sellers determine what to list their houses for.
Third, know what the average interest rate is and Google different home buyer programs in your area. A mortgage broker can assist you with this as well, which we’ll discuss in a bit.
4. You have a clear budget for your future home.
If you aren’t on a budget now, you better learn before buying that house! Pull out your Excel sheet and account for all of your predicted costs for electricity, water, sewer, garbage, Wi-Fi, parking, HOA, and an emergency fund in case anything major breaks. Account for an increase in your home’s taxes every year. If all of these expenses are sucking up half or more of your income, you may want to rethink the idea.
5. You’ve spoken to a mortgage broker and an experienced real estate agent.
I learned about mortgage brokers a month before looking for my house and I am so glad I did. These are essentially middlemen who pair you with the best mortgage rate and company in your area. They get paid by the lenders, so there shouldn’t be a fee for you. Don’t just go to your bank and call it a day – there are tons of other options out there that may be better for you. I found my broker through a quick Google search and a little investigation of their reviews.
The same goes for your real estate agent. Nowadays there are kids in college who are getting licensed to sell homes. While some of these may be great, most agents are not that involved. Find one who has either purchased various properties on their own or worked with investors – they tend to have some construction knowledge which could help you avoid buying a house with big, hidden issues under the floorboards. Shoutout to my agent Steve for saving me a time or two!
6. It’s cheaper to pay a mortgage than to rent in your area.
This doesn’t have to apply to you, but if it does you have more reason to buy.
After the pandemic, rental prices shot up in a ton of states and hot spots. They’ve been climbing pretty steadily historically, but buying becomes a lot more enticing when mortgage prices become less than rentals – I mean, duh! If your rent is only a couple hundred bucks less than a mortgage would be, it may be time to consider a home as well. Would you rather be throwing your money into a bottomless pit or slowly building a money pile from it?
7. You’re ready for the commitment!
If you’re a little nervous, that’s normal. But if you’re able to check off the last six items and have been thinking about buying a home for at least three months, then it may be time to take the plunge. Homes are big investments. While they aren’t 100% permanent, being sure you’ll be around that area for at least 3 years is a solid start.
So, do any of my viewers check off all seven ways to know you’re ready to buy a house? Let me know in the comments if you do! And, if not, hopefully, you will in no time.