Sign #1 – You’ve saved up enough money for a down payment
I’m not going to shock you when I say buying a home is expensive(!) but it’s important to remember that the typical deposit for a home purchase is 20% of the purchase price (in the US). That is a great deal of money to accumulate and is, of course, the first step before you can purchase a home. Beyond the down payment itself are closing costs (which we will write an entirely separate article about). Simply put, you need a lot of cash saved up to buy a home which is why it is sign #1 that you are ready to buy a home.
Sign #2 – You have a stable job and can afford the monthly mortgage payments
Buying a home is a commitment; you must be able to make the mortgage payment each month otherwise you are going to have a huge problem. Everyone is focused on how much money the bank will lend them but, as a smart homeowner, you must be focused on what you feel comfortable with and how much can actually afford while still having money to live your life.
Without a doubt, a stable job helps with the affordability aspect but we all know life has more expenses that just making a mortgage payment. From a car to a vacation to grocery shopping – you need money for these things too!
Sign #3 – Your credit score is good or excellent
Your favorite financial personality don’t preach about the important of a good credit score just to hear themselves talk – this is what banks look at when offering you credit. A mortgage is a fancy way of saying a loan and a loan is an extension of credit for you to buy your home. Make your credit card payments on time and in full (if possible) and do not overextend yourself. If you follow these simple tips your credit score should be just fine.
Sign #4 – You’re not afraid of making big decisions
Buying a home is a big decision as it’s likely the biggest financial decision you will make in your lifetime. That doesn’t mean you have to be nervous, it just means you have to think it through. Since you are reading this article I imagine you have done that so just go for it!
Sign #5 – You don’t mind spending more time at home than out with friends and family (or you value your new home more than socializing)
Initially, making those mortgage payments each month is going to be daunting but, over time, you will get into a routine and budget accordingly. Do not feel badly right away if you have to turn down that concert with your friends or the big football game. As a homeowner, your priorities must be in order and over time you will settle into this new expense and be able to increase your discretionary spending once again.
BONUS Sign – Your lease will be ending soon, so you need to decide on buying or renting another place!
Unless you were living at your parents’ house, you are likely coordinating the end of your lease with the purchase of your new home. After you agree to buy the home, the closing process does still take time so do not run from your lease so fast. Most closings with a mortgage take 60 days and once you get the keys you will still have to settle in. Once you know your closing date you can begin to speak to your landlord about not renewing or if necessary, extending your lease by a month or two. At a minimum, please DO NOT end your lease the day your offer is accepted!!