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For most people, the question, “Am I ready to buy a home?” actually means, “Am I financially ready to buy a home?” But your bank accounts aren’t all you need to worry about when you want to become a homeowner. It’s possible to be financially ready without being truly ready.
Confused? Let us explain.
A Proper Foundation
Let’s start with the obvious: When are you financially ready to buy a home? First you must be debt-free with an emergency fund of 3–6 months of expenses. Buying a home comes with a ton of financial risk in the form of leaky roofs and busted water heaters. By waiting to be debt-free with a cushion of savings, you can cover these risks without turning to loans or credit cards.
Next, you’ll need to save a down payment of at least 10%. Twenty percent is even better because it will help you avoid private mortgage insurance (PMI) payments. But even if you plan to pay cash for a home (which is an awesome idea), it’s wise to take a closer look at your life before you start house hunting.
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Feeling the Pressure
What’s the first question people ask newlyweds? They’ll either ask when you plan to start a family or when you plan to buy a home, right? All that pressure can make you believe there’s something wrong with you if you don’t rush out to buy. But it’s really a bad move.
The first year of married life is challenging enough without throwing in a home purchase. Give yourselves time to get to know each other before you pick out a home together. You need time to learn each other’s likes and dislikes—and how close you actually want to live to your mother-in-law!
Another bad idea is buying a home with someone you’re not married to. Doing so can result in a financial and legal mess if your relationship ends unexpectedly or if something happens to one or both of you. Even if you’re engaged and plan to marry next month, wait to buy!
Can You Make the Commitment?
Okay, let’s say you have your finances in order and you’ve been married more than a year, or you’re single and have the money to buy a home. Are you ready to buy now? Maybe not.
Buying a home means committing to a specific location for at least several years. You can’t easily pack up and move for a new job or better opportunity when you own a home. If you don’t want to take on that kind of obligation, it makes sense to keep on renting and building up your savings.
So When Is the Right Time to Buy?
Let’s put all this together and create a picture of what your life will look like when you are truly ready to buy a home.
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- You’re in a great place money-wise. You’re debt-free, and you have an emergency fund plus a nice down payment—or you’re going to pay all cash.
- If you’re married, you and your spouse have that difficult first year behind you, and you’re ready to house hunt as a team.
- Whether you’re married or single, you’re ready to stay put for a few years.
Keep Up the Good Work
After all your hard work and patience in preparing to buy a home, it would be a shame to rush out and make poor decisions when it’s finally time for you to buy. Avoid the mistakes inexperienced and impatient home buyers often make by working with a real estate agent.
Your agent will help you find the best deal on a great home in your price range. You can also trust your agent to negotiate with sellers on your behalf and make sure all your bases are covered as you go through the home-buying process.
If you already have an experienced real estate agent on your side, great! But if you’re still looking for a high-energy, high-octane agent, you can find one Dave recommends in your area.