Are You Ready to Buy a Home? Here's What You Need to Know

Some decisions are easy. Should you get tacos? Pop down to The Colony for Happy Hour? Get your dog a puppuccino? Yes, yes, and (we’re guessing) a resounding yes. But others—like the decision to buy a home—take a little more foresight and planning. In fact, for many, buying a home will be the most significant financial decision of their lives. So, how do you know if you’re ready? And what comes next?

Signs you’re ready to buy a home

There are plenty of tell-tale signs you’re ready to start your home buying journey. But we’re not talking about that gut feeling. Or the fact that your Pinterest board is full of interior design ideas. We mean the concrete, measurable facts about your life that signal you’re mentally (and financially) prepared for homeownership.

Your financial situation is stable

Hopefully, this doesn’t come as a surprise. But buying a home is a big investment. For many, it’s the biggest investment of a lifetime. So, what does “stable” look like when it comes to your finances? There are a few markers that you can check.

You’ve got a job

The first question to ask yourself: do you have stable employment? Not only will this be important for making your mortgage payments. It’s also crucial when it comes to securing that financing in the first place. If you don’t have a stable job (for example, if you’re self-employed or a contract worker), you’ll want to make sure you have a solid emergency fund. Financial experts recommend having at least six months saved to cover basic costs, like your mortgage, utilities, and groceries.

You’ve got a healthy credit score

If you’ve ever applied for a credit card or loan, you’re likely already familiar with your credit score. This number is based on a scale from 300 to 850. It’s based on a few different factors, including your on-time history payment, how much available credit you have, and your oldest credit line’s age. Essentially, it’s an easy way for creditors to gauge your ability to reliably pay back a debt. For the best interest rates, you’ll want a score in the 760-850 range.

You’ve got a low debt-to-income ratio (DTI)

Your credit score isn’t the only way banks measure your creditworthiness. Your debt-to-income ratio, or DTI, is just what it sounds like: all of your student, auto, and other monthly loan payments, credit card payments, and other debts weighed against your gross monthly income. A lower DTI looks less risky to lenders, meaning you’ll qualify for better terms and interest rates.

You’ve saved enough for a down payment

Your down payment plays a big role in how much house you can afford. You can think of it as a deposit, signaling to creditors that you’ve got what it takes to pay your mortgage. The goods news: the down payment gives you instant equity in your new home. But it can be a pretty hefty up-front expense.

Traditional wisdom dictates that you should save 20% of the total cost as your down payment. For a long time, that’s been how people gauge just how much house they can afford. But that 20% isn’t always realistic. In fact, according to SmartAsset, “most homebuyers make down payments of 6% or less. This is especially true for first-time homebuyers.” Of course, the more you can put down, the better. Higher down payments lower your monthly payment and set you up for success down the road.

You’re ready to put down roots

Deciding to buy a home isn’t just a big financial decision. It’s also an enormous life decision. Conventional wisdom says that you should plan on staying put for at least five years for your purchase to make economic sense. If you decide to ride out your full 25-30 year mortgage, you’ll be in the same house for up to three decades. If that sounds like a dream and not your nightmare, then you’re probably ready.

Signs it’s not quite the right time to buy a home

Of course, homeownership isn’t for everybody. Or maybe right now just isn’t the right time. Here are a few tell-tale signs you’ll want to pump the brakes before starting your house hunt.

Your credit score is going to hold you back

Like we said before, your credit score is a big deal in the home buying process. Mortgage rates are based on your creditworthiness. If you’ve got dings on your credit report, it might be better to wait, heal your credit, and apply for financing down the line.

You’ve got other big expenses in the next few years

This one is going to sound counterintuitive but bear with us. If you’ve got an upcoming wedding or baby on the way, you might want to wait to buy a home. Hear us out. There are plenty of expenses that come with buying a home. And you won’t necessarily know what they are on signing day, which can make long-term financial planning tricky. If you’ve got a big event coming up—wedding, vacation, new babies, going back to school—we recommend waiting for the dust to settle.

You’ve only considered the sticker price

Which brings us to our next point. The costs of owning a home go well beyond the purchase price. You’ll also have to consider property taxes, insurance, utilities, moving costs, renovations, and maintenance costs.

Breaking it down: to buy or not to buy

In summary, if you:

Have a job you love and feel financially secure
Have a down payment and six months of emergency funds saved
Understand all of the costs that come with homeownership
Are looking forward to maintenance and renovation projects
Don’t have any other significant expenses planned

Then, congrats! It sounds like you’re ready.

But, if you:

Can’t wait to switch careers, go back to school, or travel the world
Are buried in credit card or student loan debt
Would rather call a landlord about home repairs and maintenance
Can get more house for your dollar while renting

Then you might want to wait it out until you feel more prepared.

Ready to get started?

Resident agents work with buyers at every price point. No, really. Every price point. Whether you’re looking for a new build to make your own or a piece of history in Downtown Phoenix, we’ll sift through thousands of houses for sale in Arizona. And you can trust us to hand-pick whatever’s most relevant to your search. Get in touch with a Resident agent to get started.

Are You Ready to Buy a Home? Here’s What You Need to Know