Buying a house can be difficult, especially due to current events from this past year. With the number of homes for sale down and home prices increasing, it can be a very confusing time to buy a home, but that doesn’t mean it’s hopeless. We put together a guide for buying a house to be used as a lifeline for perspective buyers.
Our goal is to help more people buy homes and to help perspective buyers be financially prepared to buy. We want to help you get into a home you love and stay in it.
We believe that these are fundamentals when looking to buy:
- 3-month emergency fund– Having 3 months’ worth of expenses saved will help provide you with a safety net.
- Stable income – If your source of income is unreliable, we recommend finding a new job with better pay. It also works if you have a job that has irregular income, but you can make it last throughout the year.
- Plans to stay for 3 years– When you buy a home it’s smart to plan to live there at least 3 years, otherwise you should just rent since it is more short term.
- No credit card debt– Just about everyone has credit card debt but paying it off makes becoming a homeowner a lot easier.
These are recommended but not necessary:
- 6-month emergency fund– Having 6 months’ worth of expenses saved will help provide you with an even more secure safety net to fall back on just in case.
- No student loans – When buying a home, you must make mortgage payments so it’s smart to make sure all your student loan debt is paid off, so you aren’t paying off your home and education at the same time for many years to come.
- No car payments – Focusing on paying for a home is a lot more responsible than trying to buy a home and pay off your car at the same time. Cars lose value over time whereas homes normally go up in value
- No debts at all – By making sure you paid off all your debt it allows you to pay for your mortgage more comfortably and with less worry.
- 15% of your income going toward retirement – Buying a home can be an investment but most of the time it doesn’t last you your entire life. That is why it’s important to make sure you put money towards your retirement to help your future self.
- 20% Down payment– When buying a home making sure you have enough money for a down payment will help you immensely. By making sure you save a 20% down payment it will allow you to get the best rate and avoid PMI.
If any of these signs apply to you, we don’t recommend buying at this point
- You live paycheck to paycheck
- You pay minimum credit card payments
- Unexpected expenses throw you off for months
- You’re worried about every penny of closing expenses
If you’re not quite in position to buy, there’s a lot you can do to get yourself to that point. First, you should set a budget and pay attention to your expenses. This will help you see where you are spending money when you shouldn’t be. While following your budget this would be the time to pay off your debt. Finally, if the budget isn’t helping you save enough pick up another job to help save more. After you pay off your debts and save up enough money for a down payment you are then ready to start buying your new home. By taking these steps we believe you will be prepared to become a successful new homeowner.