Buying a home can be exciting, scary, intimidating, and liberating all at once. It brings about many emotions that are unexpected and also reassuring.
You may feel a sense of comfort knowing that you’re ready to take this leap into homeownership and settle into a place for years to come. Or you may feel nervous, wondering if you can financially manage the responsibilities that come with buying a home.
If you can truly answer “Yes” to each of these questions, then you are ready to jump into homeownership and all the ups and downs that go along with it:
Do you have a stable income?
Having a stable income is extremely important when purchasing a home. A lender will shy away from giving you a loan if you are known to change jobs frequently. They want to see stability and commitment from you with your income and savings.
Do you want to stay in the area long-term?
If you’re planning to move to a new area or city in the next year or two, it might be best to rent a home. Taking into consideration the closing costs (realtor fees, lawyer, etc.) that you will be spending to purchase and then sell home the home in a couple of years. What might seem like a good idea now, may not look so profitable when you add up the additional costs.
Are you comfortable managing your debt?
Do you pay your credit cards on time? Your phone bill? Managing your debt responsibly and in a timely fashion will not only increase your credit score, but you will also be a favourable mortgage candidate to lenders.
Having no credit can be nearly as negative as have a poor credit score in the eyes of a lender. They have no evidence to review of you paying your debts regularly in a timely fashion. If you don’t have any credit at this time, we suggest applying for some credit with low limits or a secured loan. This will assist your mortgage application process in the future.
If you have poor credit, you should start paying down debt as soon as possible, and always on time!
Do you have an emergency fund?
After 2020, we all more than aware to expect the unexpected. Having an emergency fund can help you if you find yourself in a situation of a job loss or health emergency.
You’ll also need to have savings for home repairs, as a homeowner you can no longer call your landlord if the fridge stops working or there’s a water leak in your home. These repairs are your financial responsibility and unfortunately, they are rarely cheap.
Have you saved a Down Payment?
A down payment can be extremely hard to save for. With home and living prices increasing, it’s becoming harder for people to save funds, especially tens of thousands of dollars.
If your family is planning on helping you with the down payment, you’ll need to ask them to transfer the funds to you well in advance as your lender will need to see these funds in your account for a period of time before approving your loan.
Do you know how much you can afford to spend on a home?
Having an idea of the type of home you want is fantastic, but can you afford it? You should work with your lender to obtain pre-approval financing which will let you know the maximum amount of money they will give you. From this amount, you’ll then want to calculate monthly mortgage amounts and decide on an amount that you’re comfortable with. Just because a lender has offered you a certain amount certainly doesn’t mean you need to spend that much.
Having a good handle of your personal finances, expectations, and savings will serve you when purchasing a home.
Are you willing to make sacrifices to become a homeowner?
As with any large purchase, homeownership comes with sacrifices too.
Are you willing to give up eating dinner out every weekend? Can you give up that beach vacation every year or your annual trip to Vegas?
Buying a home is a large responsibility and while you don’t need to find yourself mortgage poor, you do need to ensure that you can meet your financial commitments and save for emergencies.
If you were able to answer ‘yes’ to all these questions, you are very likely ready to take the leap into homeownership.
However, if you weren’t able to answer yes to all of them, that is OK too. There are ways to work around certain things, ways to improve credit, and much more.
JP Real Estate is here to help every step of the way. We offer advice, assistance, and can help you prepare yourself for buying your first home.