How do you actually know when you are ready to be a homeowner? Many people will say that homeownership is one of the greatest investments you can make. And while those people aren’t wrong with that statement (if you do it right!), homeownership isn’t always the best fit.
But if you’re on the fence between owning or not, these are the top 4 signs I usually see in folks who are ready to be a homeowner.
Sign #1: You’re Tired Of Renting
Rent increases. Overbearing landlords. Limitations on rental options.
Whatever the reason is, the first sign you’re ready to be a homeowner is that you’re tired of renting.
Often, a monthly mortgage and property tax payment are less than or equal to your current rent payment for a similar property. A lot of my clients who are moving from renting to owning are often surprised with how similar their mortgage payment is to their monthly rent.
Now, there are other costs that come with homeownership that aren’t usually included in your rent, such as maintenance costs, but again, those costs all depend on the type of property you’re purchasing and what you are willing to pay.
Either way, if you can actually pay less for a mortgage payment, it’s probably time to look into being a homeowner.
Sign #2: You Have Stable Income
If you have been in the same career or position for at least two years and your income has been consistent over those two years, qualifying for a mortgage is going to be a lot easier than if you have changed jobs frequently or have had inconsistent income.
Now, what does this have to do with becoming a homeowner? If you’re likely going to be in the same position for the next few years and you’re not frequently travelling, why not put roots down? If the costs of living work out to be the same as renting then I would look at homeownership as a way to start growing your investment portfolio. There’s also the potential for later in life to use the equity from your home as part of your retirement strategy, something we all need to be thinking about!
Even if you haven’t had the same job for the last two years, but still have had consistent income, let’s chat. There are mortgage options available for nearly every scenario!
Sign #3: You Have Good to Great Credit
Have you been keeping a close eye on managing your credit, pay your bills on time every month and have little unsecured debt? You are a perfect candidate to be a homeowner.
With a good credit score, you have a wider range of mortgage options available. Mortgage lenders look at your credit bureau when deciding if you’re able to pay back your mortgage. And because you have been a stellar human and managed your credit well, the mortgage lender will be happy to lend you the money to buy a home.
Now, just because you have good credit doesn’t mean you have to be a homeowner. If you’re happy maintaining your credit score where it is, then no rush! Just remember to keep paying those bills on time and checking your score every few months so when you are ready to buy, you’re an excellent lending candidate.
Sign #4: You Have A Large Amount of Money Saved
The final sign that I see with people who are ready to be a homeowner is that they have a large amount of money saved but aren’t sure what to do with it. But, buying a home with this money could be the best option.
When you buy a home, the mortgage lender will require a down payment. At a minimum, you’ll have to pay 5% of the purchase price of the home you want to buy. For example, for a $300,000 purchase, you’ll need a minimum of $15,000 for a down payment, plus around 1% for additional closing costs.
Obviously, you can put down more than 5% if you can make it work in your budget, but we would talk about that before you make any purchase. If you want to be able to access some of the equity in your home sooner, it might make more sense to put 20% down instead—there are some really cool financial tools to use the equity in your home for other projects and investments.
Your ultimate sign that you’re ready to be a homeowner is really up to you. But if all that’s stopping you right now is the belief that you can’t afford it, let’s chat. I love to lay out all the numbers and watch client’s faces as they realize homeownership is something possible. All it takes is a quick conversation. It’s really that simple.