Buying a home is sure to be a line item on plenty of bucket lists, but knowing when you’re ready to buy isn’t a question everyone is able to answer. By going through this simple checklist, you can confidently know if you’re ready to buy.
The Long Plan
Buying a house is obviously a big decision that will somewhat tie you down to a location for a while. A detailed 10 year plan isn’t necessary, but you should consider what the next 5 years may look like. If you’re planning on moving to a new city in a few years, buying may not be for you.
Room to Grow
Are you planning to start a new family or add a few kids to the picture soon? This is a very common and very respectable reason to buy. Just make sure you buy big enough for the family you’re planning for.
Savings
Setting some money aside is the first step toward homeownership. How much you need to stockpile will depend on how much you want to spend on the house and how much you want to put toward the down payment. Standard practice is to put down 20% of the total cost of the house in your down payment, but this isn’t necessary. However, if you put down less than 20% the lender might require you to pay PMI until you have 20% equity.
Credit Score
While you certainly don’t need an 850 credit score to buy a house, you will be able to get a better loan with a better credit score. Figuring out exactly where your credit score needs to be isn’t absolutely straightforward, it really depends on how big of a loan you need and what interest rate you’re comfortable with. To answer this question, you can work with your lender to see what improving your score would do for your loan.
Price Tag
The final step is to put everything together and see what you can afford right now. Hopefully, this price range will allow you to meet all your needs and fits your lifestyle for the foreseeable future.