6 Signs You're Ready to Buy Your First Home

Buying a home is a big decision, so don't rush into it if you aren't ready. 

Buying a first home is something many people look forward to. It's really exciting to own a property of your own and get to put your own stamp on it. 

But buying a home is a financial choice as well as a decision about your lifestyle. And it's a big decision. You need to make sure you are completely ready for it, both when it comes to the money side and when it comes to the realities of what homeownership means.

So how can you tell if you're ready to become a property owner? Just watch for these six signs. 

1. You don't plan to move soon

A home is not a very liquid investment and you probably don't want to buy one just to turn around and try to sell it quickly. 

Not only can it be challenging to find a buyer, but there are a lot of potential downsides to short-term ownership. For example, if you own your home only a short time, property values may not go up enough before you sell to cover transaction costs. You may also pay capital gains tax if you make a profit on your home if you sell it within less than two years. 

That's why you should make sure you're pretty settled and don't plan to sell right away before you even consider a home purchase. 

2. Your income is pretty stable

A stable income is another key indicator you're ready to buy a home. Having steady, reliable income makes it easier for you to qualify for a mortgage loan. It also reduces the chances you'll have trouble making mortgage payments as a result of a future job loss or income cut. You don't want to buy a home only to be unable to pay for it and face foreclosure. 

3. You have reasonable credit

Getting a good rate on a mortgage loan requires that you have a pretty good credit score. You don't want to pay a high rate when you're borrowing so much money and paying it back over such a long time. Unless your score is in the high 600s to low 700s at a minimum, you should probably try to improve your credit first before buying.   

4. You aren't drowning in debt

Having a lot of debt affects your ability to get a home loan since mortgage lenders consider debt relative to income when deciding whether to offer financing. If your total debt, including your new mortgage, exceeds about 36% of your income, getting approved for a mortgage at a reasonable rate is going to be harder. 

If you have a lot of debt, you may also be under financial stress and making mortgage payments may be harder. Deal with the debt first before buying your first home to avoid these issues. 

5. You're ready to take on the responsibilities of home upkeep

Homes can be hard to take care of. You need to tackle routine maintenance tasks such as cleaning the gutters, cleaning the air filters, mowing the lawn, snow plowing, and more. You'll also need to be ready for any necessary repairs, which means having the knowledge to DIY and the money for parts or the funds to hire a professional. 

6. You have plenty of cash set aside 

Buying a home requires you to have a down payment, which will ideally be 10% to 20% at a minimum to reduce the risk you'll end up owing more than your home is worth.  

You will also need to cover upfront mortgage closing costs which could equal between 2% and 5% of your loan amount. And you'll need to pay movers, and ideally should have an emergency fund before moving in. Unless you have a fair amount of money set aside to cover all these costs, you should probably wait to buy. 

While it may be disappointing to find out you aren't ready, if you don't meet these six qualifications, you should seriously consider holding off on homeownership because you may regret buying a property if you don't.