Homeownership can be very exciting. Equity building, tax deductions, a sense of pride and a place to decorate to your specific taste are just a few reasons why owning a home is often referred to as “The American Dream.” However, just as Marvel Comic superhero Spider-Man was warned, “With great power comes great responsibility.” And homeownership undoubtedly is one of the greatest forms of responsibility you may take over in your life.
We’ve all heard it’s a great time to buy – and it truly is….if (and it’s a big “if”) you are emotionally, physically and – most importantly – financially ready. If you aren’t prepared to change your lifestyle, you aren’t prepared to own a home. How do you know if you’re ready to buy? Ask yourself these questions:
- Am I in control of my spending? Do I have minimal credit card debt? If you’re already in the hole, buying a home isn’t going to get you out any sooner. Having debt will limit the amount of money you can borrow and will stretch a thin budget even thinner. It’s best to pay off all debt and build an emergency fund before even considering buying a home.
- Do I have a steady and reliable income? Financial responsibility for your home doesn’t stop at the down payment, closing costs and mortgage payments – what happens if your heating system needs to be fixed or the roof repaired? You’ve got to have enough money on hand to cover maintenance and repair of your home. If you’re unsure of your job’s security, hold off on buying a home.
- Am I willing to stay put? In most cases, buying a home means establishing roots in a community and staying there for a decade or two. It can take a few years just to recoup the transaction costs on your home, so selling before you’ve taken care of those costs wouldn’t fiscally make sense. And while we’re on the subject, you’ll need to think of buying in a community with a good school. Parenthood may not be on your immediate “to do” list, but years down the road, you’ll want to make sure you live in a good place to raise children.
- Have I thought about the future? Along with living in the same place for years, you need to think about future budget planning. When those offspring eventually do come along, you’ll need to be able to afford sending them through school, and beyond, all while keeping up your mortgage payments. This may mean cutting back on vacations, clothing or dining and entertainment expenses. If you can’t see past next weekend and you’re not willing to compromise a few frivolities in your lifestyle, you may want to reconsider homeownership for the time being.
If you’re not ready to buy a home right now, that’s okay! There’s no certain timetable that says when you must purchase a home in your life. You’ve always got time to establish credit, pay off debt and build a little cushion of savings before you’re ready to become a homeowner. Don’t let the market make your decision for you – if your family, life plans and finances are in order, then, yes – it’s a great time to buy! But if you’ve still got some things to work out, it will pay off in the end to hold off until you’re ready.
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