6 Questions to Ask Yourself Before Buying a Home

When perusing your social media accounts showcasing picture-perfect homes complete with a dreamy backyard and a gorgeous open kitchen, it can be easy to get swept up in this tell-tale question: Should I be buying a home, too?

The hard truth is that buying a home is not for everyone. Sure, owning a home can be a wise financial investment, but is it a good move for you right now? Here are six questions to ask yourself before buying a home.

1. Do I make enough money?

While you may make enough money to pay a mortgage, you also have to factor in the down payment, closing costs and extra cash for an emergency fund. What a lot of people don’t tell you is that there’s also the maintenance side of homeownership that must be considered along with taxes and homeowners insurance. Not to mention, depending on the neighborhood where you buy, there are HOA fees. To crunch the numbers, use this mortgage calculator. 

2. Do I have too much debt?

Now that you’re in the clear for your monthly mortgage and down payment, let’s assess your debt. For instance, if you’ve maxed out all of your credit cards, it’s wise to manage those prior to buying a home. Thirty-six percent of your gross income is the maximum ballpark debt that lenders prefer you to have when you’re looking to purchase a home.

3. Do I have enough funds in my savings account?

The down payment isn’t the only hurdle you’ll have to save for as a homeowner. What if your water heater breaks or a pipe bursts in your kitchen? While no one wants to worry about these surprise repairs, that doesn’t mean you shouldn’t have a cushion in your savings account to cover the costs. On the other hand, there are the expected costs of homeownership: expenses for buying new furniture, property taxes and moving costs. As you can see, your savings account must supply for much more than just a down payment. 

4. Have I been with my job for at least two years?

Lenders like to see that you have kept a steady job for the last two years since this is how your average income is calculated. Not only does this show income stability, but this also conveys the message to mortgage lenders that you’re equipped to buy a home.  

5. How is my credit?

Whether you have poor credit or zero credit, these factors are red flags for mortgage lenders. Poor credit might be a result of too much debt, so lenders may suggest that you resolve these debts before buying. If you have zero credit, lenders will look for good credit patterns in other forms, such as your rent history and car insurance.

6. Am I ready to settle down?

Experts say that if you’re considering living in your home for three to five years, then homebuying may be for you. If you’re in the habit of changing cities and moving every year, buying a home may not be in the cards for you right now since this will not be enough time for your home to appreciate or gain value.