Everything you need to know about insurance basics, like coverage types, limits, cost and more.
When Should You Buy a House?
Are you thinking about becoming a first-time home owner? The fact that it’s on your mind means it just might be the right time to start the home buying process. But it’s a big decision that requires some serious thought.
The good news is there are a number of telltale signals that can help you figure out if it’s the right time to buy a house — and other signs that indicate the moment may not be right. So before you make this life-changing leap, consider asking yourself these questions to see if you’re ready to buy your first home.
How to Know You’re Ready to Buy a Home
Sometimes, all you have to do is ask. Answer these questions honestly to help gauge whether or not you’re in a position — both emotionally and financially — to make the big move.
Do you know where you want to live?
Do you like your target neighborhood enough to stay there for a while? Buying a house doesn’t mean you can never move again. But because of bank fees, down payments and moving expenses, staying put for at least four to five years makes the most financial sense. After putting all that cash on the line, it’s important to love where you live.
Are you financially stable?
With your first home comes your first mortgage. Being fully confident in your ability to make your house payment every 30 days is a big deal. If you feel like your job and your income are on solid ground, and you know you’ll have no problem paying your other bills, it’s another good sign you’re ready to own.
A stable income is a key financial indicator that you need to take seriously. If you’re between jobs or interviewing, you may be better off waiting before diving into homeownership. Continue renting in the meantime and dedicate yourself to landing the job that can sustain you financially — and afford the home of your dreams.
Is your credit in great shape?
It’s key to keep your credit in good shape — that should be a top priority. Not only will good credit help you get a loan, it can save you thousands and thousands of dollars over time. You may qualify for a more affordable interest rate with good credit, and lenders may be more willing to offer you incentives that can save you money at the closing table.
Managing your credit profile and actively monitoring your credit rating can really pay off. By picking up optional coverage to monitor your credit, your finances may be better protected if an attempt is made to steal your identity.
Do you have money in the bank?
A down payment is a big chunk of change and a significant step in the buying process. The great news for first-timers who don’t have a huge savings account — you can buy with as little as 3.5% down. That’s still serious money but much more achievable for many. Just be careful not to spend everything you have on the down payment.
If you’re short on savings, take time to build up an emergency fund before you start shopping for homes. Once you have about 6 months-worth of mortgage payments in savings, you should typically be able to manage the down payment and all the expenses you’ll encounter when purchasing a home. You’ll need cash for closing costs, insurance and taxes. And you’ll want some left over for that new set of furniture!
Are you ready for the responsibility?
And the last — but maybe the best — sign you’re ready to buy: you know you’re ready and willing to take on this big responsibility! You’re aware there will likely be leaks, creaks, drafts, rickety roofs and worn-out water heaters. But if you’re confident you’ve got what it takes to take on these challenges and more, then you just might be ready to buy!
If your answer is less than an emphatic YES!, that’s ok too. You may be wise to hold off on purchasing a home. In some markets, from a financial standpoint you may be better off renting versus buying — especially if you’re planning on staying only a few years. Because local and state taxes, costs of living and markets vary across the US, renting may still be right for you.
Steps to Buying Your First Home
If you’ve made the decision to buy your first home, it’s important to take the time to educate yourself on the home buying process. How do you save for a down payment? Where should you buy home insurance? And what’s the deal with being pre-qualified versus pre-approved for a mortgage? Don’t worry — we’ve highlighted each step of buying your first home so you can start your home buying journey with confidence.
Once you've taken the leap and purchased your first home, connect with an American Family Insurance agent to learn all the ways your homeowner insurance can help make sure your new hard-earned dream never goes unprotected.
Related Topics: Finance