When is it time to stop renting a home and seriously consider buying your own place? That’s a personal question and a very personal decision — it really depends on your lifestyle, your finances, your employment plans, and many other factors that could make buying a house a really good idea.
To figure out where you are on the homeownership spectrum and decide what the best move is for you, personally, here are 11 indicators that it’s time to think seriously about buying a house.
YOU KNOW YOU’LL BE IN THE AREA FOR SOME TIME
Whether it’s because you’ve fallen in love with a neighborhood or market and can’t imagine leaving, or because the job opportunities in your city are better than anywhere else in the country, when you know that you want to stay in an area for a long time, it’s a good idea to think about buying a house there. You’ll be building equity while you pay your mortgage, and housing prices tend to increase over time (apart from regular market corrections), so if there’s a lot keeping you where you currently live, then you should seriously consider becoming a homeowner.
YOU DON’T HAVE HIGH DEBT
Mortgage lenders look at your debt-to-income ratio when they consider issuing a loan, and this can influence your mortgage interest rate, among other factors. To save money long-term, it’s a good idea to get yourself in the best financial shape possible before applying for (and securing) a mortgage loan, which is why you might want to do it after your student loans, credit cards, car payments, and any other outstanding debts that you have are in good standing or paid off.
YOU HAVE AN EMERGENCY FUND
Another way you can show mortgage lenders that you’re a good prospect for a loan is by increasing the amount of money in your savings account. This could be for a down payment (more on that below), but it can also be simply an emergency fund that you add to and try never to tap except for, well, emergencies.
By saving up an emergency fund, you’ll show a mortgage lender that you know how to save and are responsible financially, which can also lead to a lower interest rate and better terms on your mortgage.
YOU HAVE SOME DOWN PAYMENT MONEY SAVED
One of the biggest expenses involved in homeownership is the down payment. Again, not all loans will require a down payment; there are some loans (like those issued by the VA) that don’t ask for any money down, and also programs by the Federal Housing Administration (FHA) that will let you put as little as 3.5% down on a house.
That said, the programs that allow you to put less than 20% down also usually require private mortgage insurance (PMI) on the loan in addition to paying for the loan principal, interest, taxes, and insurance every month. This PMI amount is calculated depending on the loan amount borrowed. So to save the most money over the lifetime of the loan, it’s smart to get as close to that 20% magic down payment as you can.
YOUR CREDIT IS GOOD
One of the biggest ways that lenders assess your ability to pay back a loan is by looking at your credit score. If your credit is good and the rest of these financial attributes also apply, then it’s probably a really good time to think about buying.
Your credit score is based on multiple factors, including how much credit you have to draw from (think of this number as an equivalent to your account limit on a credit card), how much credit you’ve used, how good you are at paying back debts you owe, and a few other bits and pieces. If you’re worried about your credit score, one of the best things you can do is to make sure to pay all your bills on time and try to pay down any existing debt that you have.
YOU FEEL COMFORTABLE TACKLING BASIC HOME REPAIRS AND OWN SOME TOOLS TO DO IT
Renters have it easy in that when something happens to the place where they’re living, they can call someone else to come and fix it — and they won’t be charged for it. That’s not the case when you own the house you live in. Hot water broken? Toilets won’t flush? Lights flickering? You’re going to have to call someone to fix it for you … and pay them.
Some homes come with a warranty that can help offset some of this cost, at least for a few years. You can always ask your agent if a warranty is an option for you when the time comes to buy. But if not, it’s a good idea to familiarize yourself with some basic requirements of homeownership and the tools you’ll need to fix minor problems.
YOU CAN’T RENT AN EQUIVALENT HOME FOR THE COST OF BUYING
This might be hard to determine, but you can look for online calculators that will let you punch in several different numbers and fields, including the price of the house you want to buy, interest rates, how much money you’re putting down, how long you want to stay there, and so on. If you can tell immediately that there’s no way to rent a house like the one you want to buy for the rent price quoted, then you’re getting a good deal.
YOU WANT TO CUSTOMIZE YOUR HOME
Although renting does have its perks, one thing that a lot of renters don’t like is the fact that the home isn’t really theirs, and they can’t treat it as such. What if you want to build a fence or even do something simple like paint the walls? Better check the lease!
When the house is yours, as long as you follow local permitting guidelines, you can be as creative as you want and do as much as you want to the place to really make it feel like home. You can redo the kitchen or the closets, turn your bathtub into a shower/bath, plant flowers, start a garden — and mow the lawn on your own schedule.
YOU’D LIKE A LITTLE MORE PRIVACY
Most of the time, a house or condo you buy is going to have more privacy than one you’re renting. This is partly because you can usually get more square footage for your dollar when you’re buying a house (and hence more privacy), but it’s also because you don’t have to consider the preferences of a landlord who might want to stop by every now and again.
If you’re starting to feel strain from feeling like there are constantly people around your rental abode, then it might be time to start thinking seriously about buying a house.
YOU WANT MORE STABLE MONTHLY PAYMENTS
Some metro areas have rent control, and this might not apply there, and others place limits on how much a landlord can raise rent every year, but many do not. It’s not unheard of for a renter to pay increasingly higher rent every year.
Although your property taxes will go up as home values increase, as a homeowner, your mortgage payment is going to be stable over time — despite inflation. You’ll be paying about the same amount toward the end of your mortgage as you did at the beginning. Knowing that you’re not going to pay any more for living where you do year after year can be a huge weight off your mind, and your wallet, and can give you more bandwidth to save for things like renovations and vacations if your income increases, too.
YOU FEEL EMOTIONALLY READY
Buying a house can feel in many ways like getting married: it’s both exciting and terrifying. First-time homeowners might cycle through feelings of elation at finally having a place to call their own, then experience sudden doubts that this is really the right place, that you’re getting a good deal, that you want to stay in the area — all of those feelings are very normal.
But also like getting married, you probably know when your doubts are just a side effect of the commitment you’re about to make … and when they signify something deeper and more troubling. When you feel like you’re emotionally ready to take a step toward homeownership, then it’s time to start thinking about shopping for a house.
You can make the best decision for your current situation and lifestyle, but if you have questions about the housing market and how much money you’ll need to become a homeowner, then call us at 305-809-7650 and speak with a LUXE Properties real estate agent, who can help clear up any mysteries, helping you make an educated decision.