Buying a home is a big decision and there are many factors to consider when thinking of leaving the familiar world of rentals for the housing market. How do you know when it's the right time to take the leap?
Luckily, there are a few things that set soon-to-be homeowners apart from those who might be better off renewing their lease. Keep these questions in mind and use them to weigh your options the next time your lease is up. They may help put your mind at ease.
Would you be happy putting down roots?
Obviously, the biggest difference between renting and owning is that you're more likely to stay in one place for a long period of time as a homeowner. So conventional wisdom says that, if you want to buy a home, you should be willing to stay in the area for at least the next three to five years.
To think this through: Do you like your job? Is it stable? Could you see yourself staying there for the next couple of years? Consider your life outside of work. Are you happy with your social circle? Do you enjoy what your town or city has to offer?
If the answer to all these questions is yes, buying may be the right choice. However, if you can't shake the nagging feeling that you might find a better work-life balance elsewhere, it may be worth re-signing your lease and looking into alternative options.
Are you financeable?
The next hurdle is determining if you're financially stable enough for buying a home. For most first-time homebuyers, qualifying for a mortgage is a must, and in order to do so, you have to meet certain financial standards.
There are four components that go into getting approved for a mortgage. You have to have a reliable source of income, a decent credit score, a manageable amount of debt, and some savings (more about that magic formula here). Though each of these categories have their own requisite requirements, the general rule is that you need at least two years of stable income, a credit score above 620, plus as little debt and as much savings as possible.
If your financial status isn't up to snuff quite yet, don't worry. You'll get there. Focus on stabilizing your income and paying down any debs first. After that, you can work on building savings and then move forward when you are in better financial shape.
Are you ready for the responsibility?
Some potential buyers forget that house hunting is only the first step in the process of homeownership. After that, there's all the responsibility that comes with owning your own property. From unavoidable home maintenance tasks to budgeting for new property taxes, and a plethora of general upkeep, owning a home is not for the faint of heart.
Before heading out into the housing market, potential buyers should ask themselves if they're willing to invest a considerable amount of time and money into their new property if it needs it or if big repairs come up.
If the idea of protecting and improving your investment sounds appealing to you, you may be ready to take the plunge. However, if you feel that you have other more important priorities, you may want to consider renting for a little longer.