Purchasing your first home can be an exciting time in your life, filled with excitement, gratification and satisfaction. Although you’ve probably heard people telling you that renting is like throwing your money away, for many individuals renting is an ideal situation.
The bottom line is that, although owning your own home is incredibly beneficial in many ways, it is not for everyone. So, before you dive head first into your first home purchase, consider asking yourself the following questions:
Are you credit-worthy? Being in a positive credit situation means that you have an excellent credit history and that your credit score is at least above 700. Lenders are much stricter than they were a few years ago regarding who they will approve for home loans, so it is important to ensure that your credit is spotless before applying for a mortgage. Order copies of your credit report from all three credit reporting agencies and review them carefully, looking for any errors. If your FICO score is struggling, then it is probably best to take care of your credit problems and work to raise your FICO score before considering a home purchase.
Are you financially prepared? Being financially prepared means that you have saved at least 20 percent of the purchase price of a home for a down payment, and that you have also set aside at least six months worth of your salary for an emergency fund. If you fall short in either of these areas, it is probably best to wait until you have saved more before purchasing a new home.
Are you ready to pay taxes? Many renters fail to realize, when figuring the cost of a mortgage, the taxes that they’ll need to pay. And for many, taxes can add a few hundred dollars every month to their mortgage payment. The Internet is a great source for tax information, as is a real estate agent. Before you make the decision to purchase a home, you’ll want to factor the cost of school and property taxes into your budget.
Are you ready to tackle home improvement projects (or pay someone else to do them)? A home is a work in progress, and home improvement and repair projects are an integral part of maintaining your home and increasing its value. If you are unable to complete basic home repair and improvement projects, or if you don’t have the time or the desire, you will want to factor in the cost of hiring someone else to do this work for you. You should also factor in the cost of the repairs and improvements themselves into your monthly budget.
Are you ready to settle in? Purchasing a home usually means that you intend on staying put in one place for at least a few years. If you enjoy moving around, or if you anticipate a job move in the next couple years, then owning a home probably isn’t right for you, as you will not likely see a return on your investment.
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