A Home of Your Own
Many Americans consider buying a home an important life milestone. Your home, if cared for correctly, could be passed down for generations. Owning property can also be a strong financial asset. When you need money, you can often use real estate as collateral for a loan or a line of credit. However, houses have their own difficulties to sort through. It’s important to analyze your unique situation before committing yourself to purchasing real estate.
If you have the means, investing in your first home can be a strong financial choice. Paying down the principal of your mortgage is like paying yourself back first, as that value is returned to you in the form of home ownership. Focusing on growing your wealth through real estate ownership is a great way to invest in your future. In addition to building your net worth, mortgage payments on houses tend to stay stable. The price of rent, on the other hand, changes and frequently rises with the housing market. If you can afford a down payment on a home, you could save thousands of dollars over the years.
Are You Ready for a House?
So, the question is “How do you know when you’re ready?” There is no single sign that tells you when it is the right time for you to buy a home. However, there are some general milestones that you could be ready soon. Here are some strong indicators that you might be positioned to buy a home:
- You have a strong credit score (ideally above 700). This article can help you understand the basics of your credit score.
- You can afford to pay at least 20% of the home’s value as a down payment.
- You’re either out of debt entirely or can easily cover your debts while still investing and saving.
- You have 3 – 6 months of expenses saved in an emergency fund. If you don’t have an emergency fund yet, check out this article to learn how and why you should have one.
If your situation matches the list above, it might be the right time for you to purchase your own home. (If that is a goal you have.) However, everyone’s lives are different and there are many valid reasons that you shouldn’t buy a home right now.
Indicators You Are Not Prepared for Home Ownership
There are some indicators that it is likely the wrong time for you to mortgage a new home. These can be related to your employment, your family, or your finances, or otherwise. It may be the wrong time for you to buy a home if your situation looks like this:
- An inability to commit to staying in one place for at least the next five years.
- You are unprepared or incapable of fixing up your house if it has problems.
- Still building your savings or have large debts to pay off.
- You are interested in a house with the intent only to resell, and are not interested in actually living there.
If you are planning on buying a house, you should be prepared to stay in it and take on the responsibility of maintaining it. If you are still working on saving money or aren’t ready to commit yourself to living in a specific area, the flexibility of renting may be a better choice for you. Additionally, while buying a home just to sell it might seem like a great investment, there are no guarantees that you’ll be able to recoup the costs. The last thing that you want is to be stuck with a house that you are unable to sell.
Committing to Your Home
While buying a house has strong financial benefits over renting, it’s important to remember that you’re attaching yourself to a property with a bond that is difficult to sever. While renting has its own problems, renters have the peace of mind knowing that they can move on short notice if their living situation changes. Furthermore, if there is an expensive problem with your apartment, it is the landlord’s responsibility to sort that out, not yours. If your situation needs flexibility, then you might be better off renting for now until you are truly ready to buy a home.
Get a Second Opinion
Buying a home is also an excellent time to speak to a financial advisor about your overall plan. Wealth Management by Main Street Bank is the perfect place to start. Have a conversation with a financial advisor and ask questions to understand your financial position. Also, stay tuned for upcoming first-time homebuyer seminars with our community lenders to get an understanding of the home mortgage process.
What are you waiting for? Get connected to a financial advisor.
Registered Representatives offer securities through Securities America, Inc., Member FINRA /SIPC. Advisory services offered through Patriot Financial Group Insurance Agency, LLC in association with Wealth Management Powered by Main Street Bank. All are separate entities. There are no bank guarantees. Investments may lose value and are not bank deposits. Investments are not insured by any Federal Government Agency and are not FDIC insured.
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