For most of us, buying a home is the ultimate dream. But before you dip your toes into the real estate market, you need to make sure you’re ready!
Here are 5 things you should think about before you start your home-buying journey:
- Get a clear picture of your finances. To comfortably buy a home, you’ll need a stable income, a solid credit score and enough cash for a sizeable down payment. Plus, enough left over for your emergency fund and regular expenses. If you’re missing one or more of those pieces, now might not be the right time to buy.
REMEMBER: A home down payment can be anywhere between 3% and 20% of the price of the home. But if you want to avoid paying Private Mortgage Insurance (PMI), you’ll need enough cash for a 20% down payment. While PMI allows you to put down less money up front, it can significantly increase the cost of your monthly mortgage payment.
- Consider, are you ready to put down roots? Buying a home necessitates some larger one-time expenses. You’ll want to stay put for at least a few years to spread out those costs and increase the value of your home. If you think you might want to move to a new city in the next couple of years, you might want to stick to renting for now!
- Compare rental and house prices in your area. Buying a home and building equity is certainly a good investment. But in some areas, monthly rent may be much lower than mortgage payments for similar properties – making renting the better value.
- Look at interest rates. The higher the interest rate, the higher your monthly mortgage payment will be. Can you afford a mortgage with the current rates?
NOTE: Even if you’re not happy with the current rates, they tend to move up and down over time. You may be able to buy now and then, once the market is more stable, you can consider a refinance to bring down your rate and your monthly payment.
- Listen to your gut. It’s important to ask yourself – are you ready for the responsibilities of homeownership? Remember that in a rental apartment, plumbing issues, a leaky roof and similar issues are typically fixed by the property manager. In your own home, that’s all up to you.
If you’re still not sure, CoreFirst Bank offers free online calculators to help you decide whether renting or buying is the right option for you.
Check out our Financial Calculators
