How to Know When You are Ready to Buy a Home

January 24, 2017

Considering taking the gigantic leap into house-buying? But how do you know when you are ready to buy a home? I've got a few helpful pointers for you here.

As some of you know, my fella and I are saving for a house. I know, look at me acting all adultish, right? Frankly, it blows my mind.

But seriously, it has been a steep learning curve. There are things we have to consider and plan for that I hadn’t even thought of. It’s just plain stressful and confusing.

Luckily, we are definitely making progress towards this ultimate goal and I feel confident in our decision to move forward sooner than later. That being said, how do you really know when you are ready to buy a home?

Again, while I have yet to take this ultimate, scary plunge into the deep, dark abyss that is home ownership, I have put a lot of thought and research into the whole process. Here is what I have learned…..

Lease

If you are currently locked into a lease, you will need to be strategic about when you purchase a home. You don’t want to be stuck paying rent or a huge penalty just because you fell in love with a house prior to  your lease being up. In fact, I don’t recommend even starting to look for homes until you’re close to your lease being up.

Once that time grows closer, consider chatting with your landlord about options. Can you pay month to month after your lease is up? Will they allow you to find a subleaser? Stuff like that. Nevertheless, I’d still recommend budgeting for at least one month of overlap rent.

Staying Put

If you have any inkling that you will want or need to move within 5 years of purchasing a home, you may want to reconsider. Buying a home is an expensive and stressful endeavor. Not only will you be responsible for closing costs, but generally the first few years of your mortgage are mostly devoted to paying interest. Only after about 5 years will you actually start making enough of a dent on your principle to make a profit. Of course, every market is different and you might make major equity in only a year, but 5 years is a good rule of thumb.

You will also want to consider capital gains. If you sell your home within two years of purchasing, you can lose out big time in taxes. You can read more here.

No Looming Debt

If you have major debt, just say no to house-buying until that is more under control. Remember, a mortgage is a debt – and a big one – and if something happens to your income, you could potentially lose everything to default, foreclosure, or even bankruptcy.

You Can Afford a Fixed Mortgage

Seriously, folks, if y’all can’t afford a fixed mortgage, step away from the house and run. Investopedia says it perfectly:

The main advantage of a fixed-rate loan is that the borrower is protected from sudden and potentially significant increases in monthly mortgage payments if interest rates rise.

An adjustable-rate mortgage (ARM), on the other hand, changes with the market. So while you may initially get a lower rate, eventually the interest rate will surpass the going rate for fixed-rate loans. My friend Emmy had her mortgage go up 25% in one year because she got sucked into an ARM. Plus, if you want to switch to a fixed-rate, you’ll have to deal with closing costs again. Ouch.

Be Prepared for Upkeep

Here’s the thing: I know renting can totally blow. You want to make something of your own while also building equity and avoiding ass-ish neighbors and landlords. I get that. But you need to remember what else comes with home ownership: upkeep.

Even if you purchase a home or condo with an HSA, you will still be responsible for the leaky faucet, shattered window, or broken washing machine. You’ll also need to perform regular maintenance on your home and appliances to keep them running at tip-top shape. This all equals money and if you aren’t prepared for that, it can really, really suck. Like “I maxed out a high-interest credit card because I wasn’t prepared” suck.

Stable Relationship

If you’re considering purchasing a home with a spouse, partner, or even a friend or family member, you will absolutely want to make sure that your relationship with that person is rock solid. Just like having a baby won’t save a precarious relationship, neither will buying a home. So, for the love of Pete and his dragon, only purchase a home with someone you trust with your life. Dramatic as it sounds, too much is at stake.

 

I certainly hope this helps give you a clearer picture of how to know when you are ready to buy a home. Stay tuned for our next house-buying post, How to Qualify for the Best Mortgage Possible, to learn more about the specific financial qualifications of purchasing a home.

31 comments so far.

31 responses to “How to Know When You are Ready to Buy a Home”

  1. Nicely Describe. Communities recently sell many properties and more demands are coming with the positive response .

  2. you have to financially stable to buy a house, and always make or find a house which you can live easily.

  3. Agent Schoen says:

    I have read these outlines for home buying found very impressive, attractive and beneficial.

  4. Matt Worthy says:

    Fantastic blog! But most importantly, you should inspect a home before going to buy it.

  5. shiza says:

    Why are NJ taxpayers paying 96% healthcare premiums for comprehensive medical plans for state employees? That’s outrageous, unfair and incompetent! NJ ranks #2 in education and Maryland ranks #6 BUT Maryland spends $5.3 Billion less! Again, this is gross incompetence that continues year after year in NJ and the residents suffer. Time to move.home buyers

  6. lisa says:

    Hello,
    Hello, Focusing on the database has become such a necessity today especially in today’s data-driven technology and internet with millions and billions data storage capacity into various storage points. It’s good to see this article start with a data set point.Apartamentos en Venta

  7. omia says:

    At long last you should take the majority of this data you have a compose on page on what you see your life being throughout the following year. Doing this is an extraordinary exercise to truly observe what you need out of life.HVAC Repair Fayetteville NC

  8. shiza says:

    Yes. Please let’s address our property tax issue. Every person I know in my age group plans on exiting the state because of their yearly property tax burden. It’s impossible to retire here in the homes we worked so hard to own. This is so sad and a serious issue that is not receiving any real attention. New Jersey is viewed as a greed state that will implode one day.home inspectors fayetteville nc.

  9. shiza says:

    I divulged this internet website. Pleased when I put your web website as a result of the reality that I instead liked this along with me, together with that, plan for the sticking to message. I will absolutely ensure to seek you are sticking to publishing.locksmith 32225

  10. shiza says:

    I really appreciate your article, I thought that investing in real estate is more profitable as compared to investing in gold. And also there are less risk factors in real estate investment. So that’s why I personally prefer to invest in real estate.carpet cleaning fayetteville

  11. shiza says:

    relationship that is taking place between municipalities and real estate has led to new demands being established by mayors, which is having as a consequence limiting the development of housing projects, especially of apartments.here travel agency in uttara you can find all those.Kampong Java

  12. shiza says:

    you said that an entrepreneur should value his freedom. We lose our focus amidst all the worries and the hunger to earn more money. The sole priority as to why we chose to be entrepreneurs is lost somewhere in the darkness. Thanks for reminding us through this blog post.gutters raleigh

  13. carry says:

    I really appreciate your article, I thought that investing in real estate is more profitable as compared to investing in gold. And also there are less risk factors in real estate investment. So that’s why I personally prefer to invest in real estate.malta real estate

  14. carry says:

    I really appreciate your article, I thought that investing in real estate is more profitable as compared to investing in gold. And also there are less risk factors in real estate investment. So that’s why I personally prefer to invest in real estate.kinzo vanier

  15. carry says:

    What an interesting premise, and a fascinating way to go about telling a story! I like the innovation, and it sounds as though the memoir part and the fiction part blend together effectively. Glad you enjoyed it, Hayley.This site

  16. mls says:

    I really liked this post regarding commercial real estate, it will really helpful for everyone people should know about every type of properties. Keep giving updates

  17. carry says:

    Yes. Please let’s address our property tax issue. Every person I know in my age group plans on exiting the state because of their yearly property tax burden. It’s impossible to retire here in the homes we worked so hard to own. This is so sad and a serious issue that is not receiving any real attention. New Jersey is viewed as a greed state that will implode one day.locksmith

  18. tuky says:

    What an interesting premise, and a fascinating way to go about telling a story! I like the innovation, and it sounds as though the memoir part and the fiction part blend together effectively. Glad you enjoyed it, Hayley.finding a Realtor

  19. lisa says:

    You make some valid points, but as the article states regardless of how much interest or whatnot you would throw away you’d still walk away with over $300k in gains tax free on top of the principal that was paid back over the 10 years.

    With ultra low interest rates and modest mortgage payments after 10 years the remaining mortgage is only $275k. This would mean $125k of principal in the home. Count on top the $300k+ in gains and the person would have $425k+ in net worth starting from $20k. That’s over 2000% gain on original principal in net worth.

    In the stock example, you made the assumption that people save but statistics show thatr average Canadian saves less than 2% of their pay. On top of that less than 10% of Canadians will invest in anything other than GICs and high interest savings so the likelihood of your scenario coming true is minimal. Buying a home forces savings and is easy for people to understand. Pay my mortgage and let rising prices help me to retirement.

    For 99% of the population real estate is probably their best and only investment. I don’t disagree with your argument, but with leverage from real estate and the risk averse nature of real estate it’s the best advice for the normal guy.we buy houses maryland

  20. lisa says:

    The guests began arriving at the cruise ship port of call in Bridgetown, Barbados on Friday, June 15, where the gleaming white, nine deck, 440-foot vessel awaited. By 6:00 p.m. the following afternoon, more than 250 of the world’s most dedicated Scientologists were on the dock or already on board and standing at the rails in the island breeze.sell your house

  21. james thomas says:

    The looks definitely splendid. Everyone of these dwarf tips can be fabricated by using lots of records go through. I want everything you need noticeably. leader north London real estate

  22. lisa says:

    The guests began arriving at the cruise ship port of call in Bridgetown, Barbados on Friday, June 15, where the gleaming white, nine deck, 440-foot vessel awaited. By 6:00 p.m. the following afternoon, more than 250 of the world’s most dedicated Scientologists were on the dock or already on board and standing at the rails in the island breeze.apartments in qawra

  23. lisa says:

    Your dream home sounds a lot like mine, minus the chickens. (Though I wouldn’t mind having neighbors who have chickens that I could buy eggs from.) Our next family adventure is taking us up to Boise and I’m hoping to find a dream home in the next few years to make our own. I hope everything works out for you (and selfishly because I want to see all the deets on how you renovate!) Sending prayers and hopeful energy that your home sells in time for you to snatch up the home you want!residence laval

  24. lisa says:

    My wife and I have been looking for apartments for rent, and I think that having some tips on what to look for would be helpful for us. I’m glad that you talked about looking into closet space when you’re looking at apartments for rent! My wife needs her closet space, and I think that being able to check into that while we’re shopping around for downtown apartments for rent would be a good thing for us! Thanks for the tips.raingo gutters

  25. jack says:

    Apart from the standard housing facilities, you can think about, there are several extra amenities that you can decide upon, of course depending on your budget. This will also go as far as things like food preferences or rather what type of food you will want your workers to eat in their messes.parc canberra ec

  26. lisa says:

    The example in this post is very simplistic. Once you take into account mortgage payments, insurance, property taxes, and maintenance, it’s easy to figure out you’ll have more money at the end of the month if you rent rather than buy. What you do with that money is the real question.

    Assuming you’re renting and saving some money – if you invested $20k on an S&P 500 ETF in January 2009 and then put another $1000 every month into the same ETF, right now you’d be sitting on around $300k – more than doubling all the money you put in. In short, you invested $144k and now you have $300k, minus capital gains tax and whatnot.

    By contrast, to those $308k you made selling your house, you need to subtract 10 years worth of interest payments, insurance, property tax, and maintenance costs – all the clogged pipes, broken appliances, wall re-paintings, and maybe even replacing the roof. I don’t know exactly how much that would leave you with, but I’m sure it’s a very significant dent.Allgreen Properties

  27. lisa says:

    My wife and I have been looking for apartments for rent, and I think that having some tips on what to look for would be helpful for us. I’m glad that you talked about looking into closet space when you’re looking at apartments for rent! My wife needs her closet space, and I think that being able to check into that while we’re shopping around for downtown apartments for rent would be a good thing for us! Thanks for the tips!Orchard Road Shopping Centre

  28. lisa says:

    Omg I’m beyond happy for you but I’m with Doug hopefully you’ll stay a bit longer at this one. Nicks with you he’s had itchy feet for 15 years but I put my foot down so he bought our first motorhome! So much love sent to you with this message. I’m sure you’ll make it wonderful as you always do.malta property

  29. annieyu says:

    Your dream home sounds a lot like mine, minus the chickens. (Though I wouldn’t mind having neighbors who have chickens that I could buy eggs from.) Our next family adventure is taking us up to Boise and I’m hoping to find a dream home in the next few years to make our own. I hope everything works out for you (and selfishly because I want to see all the deets on how you renovate!) Sending prayers and hopeful energy that your home sells in time for you to snatch up the home you want.markham homes for sale

  30. lisa says:

    My wife and I have been looking for apartments for rent, and I think that having some tips on what to look for would be helpful for us. I’m glad that you talked about looking into closet space when you’re looking at apartments for rent! My wife needs her closet space, and I think that being able to check into that while we’re shopping around for downtown apartments for rent would be a good thing for us! Thanks for the tips!residence laval

  31. lisa says:

    The guests began arriving at the cruise ship port of call in Bridgetown, Barbados on Friday, June 15, where the gleaming white, nine deck, 440-foot vessel awaited. By 6:00 p.m. the following afternoon, more than 250 of the world’s most dedicated Scientologists were on the dock or already on board and standing at the rails in the island breeze.Twitter Marketing

Leave a Reply to Matt Worthy Cancel reply

Your email address will not be published. Required fields are marked *

Welcome!

Get Updates Via Email

Join The Frugal Beautiful Update List!
Get Posts Sent To Your Inbox...subscribe below!



test