Editor's Note: This story originally appeared on Point2.
If you’re yearning to buy your own home, you’re not alone. For many of us, homeownership is a life milestone to strive towards.
The control you gain when owning a property rather than renting one is a dream, in addition to the fact that you’re rewarded with a real financial asset.
However, it’s no easy task and certainly not something to enter into lightly. Purchasing a house is a huge financial investment, not to mention a risky legal commitment.
It’s essential to go into it with a complete understanding of not only what the buying process involves but also your ongoing commitments.
So, is homeownership the best move for you right now? Let’s look at the following eight signs that show you’re ready to buy your first home.
1. You’re in a Good Place
Homeownership is a real commitment and something that requires a fair amount of stability to really make it work. If you’re not entirely happy with your current circumstances, there’s a good chance that buying a home won’t make things better. In fact, it can often make it worse.
For example, purchasing a home with your partner might seem like it shows commitment to the relationship. But, if the relationship is on rocky ground, to begin with, the stress of buying a home could cause more damage than good if you’re not on the same page.
If you’re going to buy a house with a partner, you need to be certain that you’re both in a good place and can weather the disagreements and stressful times.
Likewise, if you have dreams of traveling, now perhaps isn’t the best time to be looking at buying a house. There’s no point in going through the process of purchasing a home only to get itchy feet a few months down the line.
Homeownership isn’t something to rush into, and if you do yearn to travel, it’s best to do it before you think about settling down.
Essentially, homeownership can be a great idea if you’re happy with where you are in life and you’re looking for long-term stability. Otherwise, it’s best to hold fire.
2. You Have Job Security
Similarly, a large part of being in a good place is enjoying job security and a stable income.
Most homebuyers will need to take out a mortgage, which means you’ll have monthly mortgage payments to make on top of utility bills, maintenance costs, taxes, insurance, and various other fees you wouldn’t need to worry about while renting.
Missing mortgage payments can lead to losing your home, so having a secure and steady income is essential.
If you haven’t had a secure job for at least a couple of years, now might not be the ideal time to be looking at buying a home.
3. Your Credit Score Is Healthy
Besides a stable income, you’ll need a healthy credit score to qualify for a mortgage.
To take out a conventional loan, you’ll need a credit score of at least 620 in the U.S. or 680 in Canada. A higher score is always more desirable as it will typically result in more favorable terms and a lower interest rate.
If your credit score is low, it’s well worth taking a few months or so to increase it — you’ll have a lot more success when you speak with lenders if you do.
4. Your Debt Is Under Control
A little debt isn’t a bad thing. In fact, it can actually help you increase your credit score.
However, if you’re planning to buy a house, you need to know that any debt you do have is well-managed and under control.
Lenders will be extremely wary of offering you a loan if you’re deep in debt. So, start paying it off and get it under control before you consider house hunting.
5. You Have Enough Savings for a Down Payment
Even with a perfect credit score, a stable income, and knowing that you want to settle down and buy a home, you won’t get far if you haven’t got any cash for a down payment.
For a conventional loan, lenders usually require a down payment of at least 3% in the U.S. or 5% in Canada. This usually means tens of thousands of dollars you’ll be required to pay outright.
For the best loan terms and to avoid private mortgage insurance (PMI), a down payment of 20% is desirable.
6. You Have Enough Savings for More Than the Down Payment
When you buy a home, there are more things to pay for outright than just the down payment.
So, you must also have a sizable chunk of cash stashed away to cover the myriad of hidden fees and closing costs.
In addition, it’s also advisable to keep a safety cushion in savings to tide you through the first few months of homeownership.
7. You Know What To Expect
Before entering the lengthy and quite challenging purchasing process, it’s essential that you do your research to get a good idea of what it involves, what steps you need to take, and who you need to talk to.
Moreover, being aware of the various fees and payments you can expect, before, during and after the sale, is important.
And of course, you should also grasp the idea that once you’ve bought a home, you’ll have various long-term responsibilities and tasks, such as maintenance and upkeep, for instance.
8. You’re Realistic About Things
Homeownership may be a dream, but you have to be realistic about it. Buying a home is stressful, and it’s doubtful that you’ll find the perfect fit.
If you’re not willing to sacrifice some of the things you want from a home, then now perhaps isn’t the right time to be searching.
On the other hand, if you’ve thought long and hard about your needs and wants and are willing to compromise, you’re well on your way to homeownership.
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