How do you know you’re ready to buy your first condo or house? Here’s a checklist of seven key things that every first-time homebuyer should have in place before buying a new home – no matter which way the housing market is headed. Homes and condos for sale come a dime-a-dozen, so make sure you do your homework first.
You’re ready to sign on the dotted line if…
1. You know how to stick to a budget. Owning a new home comes with new and unfamiliar expenses, so managing your money well is crucial to maintaining your new place. If you don’t follow or even have a household budget, create one. You must know where you stand financially in terms of cash flow before you can even start looking at condos for sale.
2. You have a considerable down payment. You’ll generally need a sizable down payment to get the ball rolling – usually it’s 20% of the total cost of the home. That means a $200,000 home will require $40,000 upfront. Here is the Average March 2014 for home and condos prices.
3. You’ll need a steady, reliable income source. Purchasing your first home is a long-term financial obligation. It won’t be possible to buy a home without consistent cash flow to pay the mortgage each month, not to mention all the extras that come with homeownership like utilities, maintenance, and interior decorating. Take a good hard look at your financials before looking at any houses or condos for sale.
4. You have a backup emergency cash fund. Every homeowner needs at least 3 – 6 months of living expenses on hand just to be safe. No one knows what the future holds, it’s best to be prepared.
5. Your credit report is in good standing. It’s not necessary to have perfect credit in order to become a homeowner. However, a decent credit history will help you get a significantly lower interest rate for your mortgage and therefore a lower monthly payment.
6. Your debts are under control. Home lenders want to ensure you have enough money to pay your financial obligations each month. So, prior to lending you any money to buy a home, they analyze your debt-to-income ratio before making their decision.
7. You know you can make a solid commitment. Are you ready to settle down for a minimum of 4 or 5 years? Generally, that’s the length of time you’ll need to stay put in order to recoup your buying and selling expenses. If you sell before 5 years have passed, you’ll likely lose money – perhaps a great deal.
Go over this critical checklist to see if you’re actually ready to take the big step of homeownership, or spend a few more years preparing yourself.