How do you know you're ready to purchase your first home?

How Do You Know You’re Ready to Purchase Your First Home? 

Purchasing your very first home can be an incredibly exciting time. Whether you’re living with family, roommates, or renting your own apartment, condo or home, the thought of having a place to call your very own can be thrilling. You can make changes and renovations on your own terms, can paint and repaint without checking in with anyone, and can finally spend any money you’re paying towards rent on a mortgage (AKA building up equity for Y-O-U!).

But for all of the benefits home ownership has, there’s an equal amount of major responsibility and readiness that comes with purchasing a house of your own. Without the homeowner or landlord to call if something goes wrong, you’ll need to pay for repairs yourself. You’ll have to commit to a payment every month. And likewise, if you ever decide the home you’re purchasing just isn’t for you anymore, you’ll need to go through the entire process of selling your home. 

So, with all of the pros and challenges involved, how do you know if you’re ready to finally purchase your first home? 

You’re ready to transition into something more “permanent”

Often, one of the key ways you’ll know you’re ready to own your own home is when you realize you’re in a place where settling down location-wise sounds appealing. Especially if you’re used to moving every couple of years, or love the idea of not being tied down to one specific place, weighing whether or not owning a home will make you happy is the big question. But often, feeling the desire to be in a more permanent place (and being ok with the long-term obligation) can be a first step to knowing you’re ready for the home ownership journey. 

You’re comfortably able to make the down payment

Purchasing a home, especially in the beginning, can get pretty pricey. In many cases, home hunters plan on working with a lender to purchase their home via monthly payments. But initially, a down payment is usually expected. This can typically range anywhere from 3% to 20% down, and is only one part of the fees or move-in costs that can often be required. If you and your lender have calculated your down payment, and you can easily afford to cough up the dough without going broke, you’re one step closer to being in a great position to purchase a home. 

You have a nest egg saved for maintenance, repairs, etc. 

Again, home ownership is much more than just your initial down payment and monthly mortgage. Although new builds typically come with “bumper to bumper” warranties for some time, you’ll eventually need repairs on things that either fall outside of that warranty, or that are needed beyond the warranty period. And repair costs can add up fast. If you’re set on purchasing a home, make sure you have the expendable income to be able to keep up with repairs within your home as needed. This could mean a new garden hose to replace your broken one in the backyard, or purchasing an entirely new hot water heater after your previous one breaks down. 

You don’t necessarily have to have an unlimited resource for repair cash up front. But keep the potential need for repairs in mind, ensure you at least have some money (or source for the money) at first, and continue adding to your fund month after month. 

You’re ok with a monthly payment 

Mortgages can get expensive, and it can be easy to overestimate how much you can comfortably afford over time. Remember, after you purchase your home, you’re on the hook for (often) thousands each month. And even if you’ve lucked out with a payment far less than that, this is still a long term agreement. Make sure you’re ok with shelling out your mortgage money every month, and that doing so won’t negatively affect other goals. If it does, it might be time to reevaluate if home ownership is the right decision for you at this point in time. 

You’ve focused on your credit

Unless you’re a cash buyer, credit matters big time when purchasing a house. And even if you have hundreds of thousands saved to buy your home outright, your credit can still affect things like down payments for utilities, insurance rates, and more. Most people who feel truly ready to purchase a home have paid attention to their credit, ensuring they’re paying all of their debts on time and that they’ve managed to raise their credit score to a place that will help them when it comes time to take out a home loan. 

One of the most important first steps here is to talk to a lender and get pre-qualified. This is huge, as it will give you a clear picture of your credit health, as well as what you need to do (if anything) to optimize your current score. A good lender will walk you through exactly what you need to do, the timeline you can expect, and each of your options. 

Your debt is manageable 

Likewise, the debt that you currently have needs to be manageable. If you’re in a place where you’re struggling to make monthly payments, or one extra bill would cause you to be late on other financial payments and obligations, you may not be in a place where a new home purchase is right for you. The good news? If you’re in this situation, you can always work to bring your debt down so that purchasing a new home won’t feel like such a heavy load when you do finally get to that point. In any case, make sure you have enough expendable income that you can pay all of your bills comfortably, afford all of your additional expenses, and not feel like you’re walking a tightline in the process. 

Purchasing a home is a huge achievement, and something that can often take a lot of work to accomplish. So, if you think you’re ready to take the leap, find a realtor and lender you trust. Your lender can give you an honest layout of where you are financially, all while your realtor can help you to set realistic expectations on location and home size. And don’t worry – even if the result is that you’re not quite ready yet, lenders and realtors are always happy to help. At the end of the day, they know that when you are finally ready, they’ll likely be one of the first places you go for help.