Deciding to purchase a home is a major commitment, which is why people often struggle with the decision of whether to keep renting or to buy a home. There are many financial and lifestyle factors that influence this decision and we cannot stress enough to not take the decision lightly.
While there is no quiz to determine which is best for your situation, we’ve provided you with some of the most important factors to consider.
Is your rent increasing?
If rent in your area is steadily increasing, it may be a smarter financial decision to purchase a home. Not only would you possibly end up paying less per month, but you would also be gaining equity.
Do you have a stable career and income?
Needless to say, it would be silly to consider purchasing a home if you’re unstable financially. If you can predict your income for the next 7-10 years, you are most likely financially prepared to purchase a home. Many lenders prefer candidates who have been in the same career field for at least two years prior to purchase.
Can you predict your housing needs for the foreseeable future?
Your housing needs can vary from one year to the next. It could be as small of a change as needing more room for a new sofa to needing an extra room for a new addition to the family. We’re not telling you that if you think your housing needs will change you shouldn’t purchase a home.
On the contrary, we’re asking that you consider the ways in which your situation may change and account for them in the home you decide to purchase. Your home shouldn’t just accommodate your needs at the moment, but for the next 5-10 years.
Are you planning to stay in your city for five or more years?
This point flows seamlessly with the last, if you are not planning to stay in the same area for at least five years, it isn’t always financially worth it to purchase a home.
Are you ready for additional responsibilities?
Many people do not consider the additional responsibilities that arise with homeownership. If you currently live in a rental, you most likely call your landlord every time something breaks. Needless to say, when you own a home, there is no landlord to run to. You must be able to absorb the additional costs of repairs, in addition to your monthly mortgage payment.
As you can see, there are many factors that go into deciding to purchase a home. Below are some indicators that you are financially ready to purchase a home:
- You’re out of debt.
- You have an emergency fund saved.
- You have a down payment saved.
- You have good credit.