There is more to homeownership than getting a mortgage or paying the down payment on a loan. Getting ready to own your first home means that you need to prepare for a new lifestyle. It requires you to make both life and financial plans.
It is important to consider your finances and current standards of living before purchasing your dream home. Here are the signs that you’re ready to invest in a house:
Ready for a Commitment
Home ownership is a long-term commitment. It is unwise to purchase a house you’ll own for less than three years, as the high transaction costs of buying or selling properties may cause you to lose money. If you plan to stay put in a single location for a decade or more, then home buying is the right move.
Taking out a mortgage means entering a long-term financial commitment. Experts from VisionOneHomes.com.au and MoneySmart.gov.au say that you need to be confident that you can afford your monthly payments 10 or 20 years from now. You need to have a stable income and at least one year of employment history in your current job.
Savings for Down Payment
Having significant savings is important for soon-to-be homeowners. This is because you’ll need money for your down payment and other moving expenses. While it is much better to pay a larger down payment, this does not mean that you have to sacrifice your savings. A 10 per cent down payment is the minimum, but 20 per cent is much better.
Good Credit Score
Most home loan companies implement credit score requirements for you to qualify for mortgage. Having a poor credit score may mean higher interest rates over the life of the loan. It is always better to have a stronger credit score so that you pay less.
While home ownership will make your life so much easier, it takes a lot of time and energy. There are many responsibilities involved in maintenance and making sure it remains an ideal place for you and your family. Even if you can afford to buy one, you shouldn’t just do it because you can. Make sure you are financially and emotionally ready for this big step.