Owning a home is a big part of the “American Dream,” but acquiring one isn’t as simple and straightforward as you might think. There are a lot of technicalities involved with buying new property, so it’s best that you familiarize yourself with the process before making any brash decisions. If you’ve been thinking hard about buying that dream house, here are six signs to indicate that you’re ready to do so.
1) You can make a sizable down payment.
When it comes to buying a house, the down payment is something to carefully consider. Ideally, you should put at least 20% of the value of the home down. This 20% mark is sometimes mandatory, and you will not even be considered as a prospective buyer without the ability to make this initial payment. If you can afford it, you should put down as much as you can right off the bat. This way, your monthly payments will be lower, and as a result, you will pay less in interest overall.
2) You’ve considered the costs of home ownership.
Buying a house isn’t just about paying for the home itself. There are so many other costs and fees associated with home ownership. First of all, you need to remember that interest will have you paying much more than face value over time. Unless you can pay off the entire house with one lump sum, you’ll be forking over a bit extra every month. Interest aside, there are many other costs of buying a home. Closing costs and fees can take a significant chunk out of your bank account if you didn’t already plan for them ahead of time. You also need to factor in initial renovation and repair costs, miscellaneous installation costs, utility costs, and plenty of other unmentioned expenses. If you don’t already have a fair idea of exactly what you’ll need to pay for and how much everything will cost, don’t sign any contracts.
3) You have a stable job.
After reading the last paragraph, you probably now realize that buying property can be far more expensive than what you initially thought. If you don’t have a decent-paying, stable career, buying a home can get you into far more trouble than you’d ever want. These days, you should expect to pay at least $100,000 for a modest, single-floor home. Of course, size, location, and the current state of the market have a lot to do with cost. Nicer homes with two or more floors usually range between $300,000 and $500,000. If you have a taste for the finer things in life, a suitable home could cost you well over a million dollars. Start saving money now.
4) You do not owe a ton of debt.
If you have a lot of debt–say over $30,000–it’s not the best time to invest in a new home. Pay off your students loans and credit cards before adding more to the existing mountain of debt. Many banks will not allow you to purchase a home if you owe too much money.
5) You have good credit.
Good credit is important because it shows banks that you can manage your time and money well. You can get lower interest rates or even a lower price on the home with high credit scores. A low one could disqualify you from purchasing a house.
6) You really, really like the house.
When it comes down to it, only you can decide if you are ready to buy a house. If you are convinced that you have found the house of your dreams, go for it. Even though saving money is usually the idea, paying a little extra, taking a higher interest rate, or eating ramen noodles for the next three years might all be worth it in the end.