My husband and I have been on the hunt for a house to call our own for about five months now (what can I say, the Denver market is crazy), and while there were a lot of questions that we newbies had about the entire process once we started looking, there were also a lot of questions that we asked ourselves before even deciding to start the search for a house in the first place.
Here are a few of the questions that I think really helped us determine that we were ready to purchase a house. If you’re a first-time homebuyer, they might be able to help you, as well.
Question 1: Am I as financially secure as I could be?
Why it helped: Of course life isn’t a sure thing, and there’s no way to know for certain when someone might lose a job or come up against a large expense, but when you’re considering buying a home, you want to at least be as sure as you can that all your financial ducks are in a row. Do you have a steady job that’s been steady for at least a year (preferably two)? Do you have enough saved for a substantial down payment (preferably 20% of the overall cost of the house), as well as additional money for emergency savings and/or any immediate costs that may come up once you’re in the house (hey, it happens)? Will you be able to handle the monthly mortgage payments, as well as property taxes, homeowner’s insurance, any HOA fees and additional utilities? While some of this might be hard to figure out ahead of time (like what your new electric bill will be, for example), other things like your mortgage payments, property taxes, HOA fees, should come to your directly from your mortgage broker and/or realtor.
Question 2: How long do I plan to live here?
Why it helped: Financial experts say that five years is generally the break-even point where you can expect to make your money back on a house should you decide to sell it (of course there are many factors that go into this number, but it’s a good overall rule-of-thumb). If you’re not sure where you see yourself in five years, or if you consider yourself more of a rambling rose, then perhaps buying a home right now isn’t the right scenario for you.
Question 3: Have I (really) done my research?
Why it helped: If you do plan to live in your first home for a while, then it’s important to picture your future self and consider whether the home (or area) you’re interested in buying will fit your future needs. For example, if you plan to have kids there, how is the school district? Is it near a decent playground or outdoor play area? Is it close to public transportation if you won’t be working in your hometown? Have you looked up any crime statistics? Falling in love with a specific house is one thing — and that’s certainly important — but it’s equally as important to love the general area where you’ll be living, as well.
Question 4: Am I ready to be my own landlord?
Why it helped: If you currently live in an apartment you’ve probably noticed the trade-offs by now. Noisy neighbors may frustrate you, but when your bathroom ceiling leaks and it’s not up to you to fix it, that can be pretty nice (assuming you have a decent, timely landlord). When you own your own home, it’s entirely up to you to maintain the house and everything in it, which includes finding professionals to fix anything that breaks, and paying for those fixes, as well.
Question 5: Am I ready to be stagnant with my finances for the next few months?
Why it helped: When you’re applying for a mortgage you might be shocked with how much information you’re forced to hand over to your broker (or multiple brokers, if you’re shopping around). Your credit score is immensely important during this time, as it will help determine what types of loans you qualify for, what your interest rate will be and how much house you can buy. In other words, it’s very important. That means that during the entire house hunting process — from pre-qualification down to signing on the dotted line at closing day — you should be prepared to go on a temporary credit hiatus. Of course you’ll continue living your day-to-day life, but big expenses — like that girlfriends’ getaway, a new car or furniture for your fancy new abode — are purchases that are frowned upon during this time. You shouldn’t even open a new credit card at all until you’re all moved in and free and clear.
If you’ve asked yourself all these questions and all signs point to yes, you’re ready, then consider checking out this piece about what to know before getting pre-approved for a mortgage, this one about what mortgage loan officers worry about most, and this one about the one tool that’ll help you find the best mortgage rates.