What should a new homebuyer know before they start shopping? Here are some tips to help keep you confident and prepared.
Scrolling through your Facebook timeline in your twenties and thirties can feel like a never-ending slideshow of #adulting milestones. Why is everyone engaged all of a sudden? When did so-and-so have a baby? Chances are, you’ve seen quite a few “We just bought a home!” posts, too. If you’re one of the 80% of millennials would like to purchase real estate, watching all your friends buy a home can trigger massive FOMO.
We’re here to help you figure out whether you’re ready to join the homeowner ranks! As fun as it looks on social media, buying a home before you’re ready or for the wrong reasons can be a huge mistake. Let’s go through the top 3 reasons you might not be ready to buy a home right now:
1. Not enough money saved
So you’ve saved enough to make a 10% down payment on your dream home, congrats! Unfortunately, the down payment is only one part of the costs you’ll need to pay upfront. Once you cough up that 10% down payment, you’ll still need to pay for any closing costs, necessary inspections, repairs or maintenance costs, the first few months of mortgage and insurance payments, and any moving costs. Closing costs can run anywhere from 2-5% of the asking price while typical home inspections are around $350-500. That’s on top of your down payment!
Keeping all that in mind, is your dream home still within your housing budget of 30-33% of your yearly income?
2. You’re on the move
Due to the high up-front costs of buying a home, real estate is not generally a good short-term investment. The days of flipping distressed properties for a profit are over so if you’re planning on making money on the sale of your home, you’ll need to stay put for at least five years. If your career or relationship status isn’t particularly stable or you’re considering exploring new areas in the next few years—buying may not be the smart choice right now.
3. You’re still working on your credit
A low credit score won’t make it impossible to buy a home, but it will make it more expensive. Check your credit score on free sites like Credit Karma—the higher your score, the better your interest rate on your mortgage will be! This can make a big difference in your monthly payments so if your credit score isn’t particularly healthy right now, you may want to wait to purchase a home. If you’re not sure where to start, a loan officer will be able to help you navigate the process of repairing your credit and getting ready to buy.