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When are you ready to buy a home?

When are you ready to buy a home?

December 12, 2017
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Being the biggest purchase most people will ever make, buying a home is a very big step. Owning a home, however, is not for everyone. There are several items that should be taken into account when figuring out if you can buy a home.

  1. Can you afford it? The most obvious question is if you can afford to buy a home. Most people go from renting to buying, and try to match their mortgage payment with their current rent payment. That’s an important first step, but there are many other costs associated with owning a home. Some or most of these were probably paid for by your landlord, but if you own your home, you will cover these costs.
    1. Property Taxes
    2. Water
    3. Internet/Television
    4. Utilities
    5. Maintenance/Repairs
    6. Homeowner Association Fees (HOA)
  2. Is your debt under control? Most banks or lending institutions like to see the percentage of income that goes towards debt (new mortgage included) under 36%. If you have a large amount of credit card debt, pay that down first and revisit the home purchase in the future.
  3. Do you have enough for a down payment? Nowadays, you can buy a home with as little as 3.5% down. However, a down payment below 20% will result in you paying Private Mortgage Insurance (PMI). This tacks on an additional percentage to your monthly payment. Closing costs associated with buying a home are an additional cost. For example, if you plan on buying a $200,000 home with 3.5% down, that is $7,000. Add on another $5,000 at least for closing costs and you wind up with $12,000 you will need at closing. Can you afford this?
  4. Do you plan on moving in the next five years? If you plan on moving within five years, then it may not be worth it. Historically, homes increase in value by about 3% per year. If you plan on moving in a couple years after purchase, the amount you receive in appreciation may not even cover the down payment. Not to mention the majority of your loan payments in the first few years will go towards interest.
  5. Do you have an emergency fund? This is a very important step for your finances in any part of your life. You need to have money set aside for emergency expenses. It becomes even more important when you own a home, however, because you now have appliances, a roof, etcetera that could need repairing/replacing at any time.


Owning a home is still a very important step for an adult, but, it isn’t for everyone. Using the list of things above, take a real good look as into whether or not you can (or even want to) buy a house. Having a long-term asset, like a home is essential in the grand scheme of things, but having your finances in order before taking that step is crucial.

Note: The materials provided in this article are opinions from the author and should not be taken as personal financial advice. Please do your due diligence and consult with a financial professional before making any financial decision.