Purchasing a home is one of the biggest financial decisions that you’ll make in your lifetime, so it’s only fair that you spend some time thinking about whether or not you’re ready to make this commitment. But rather than spending months, or even years going back and forth between the pros and cons of purchasing a home, it's best to instead understand the signs that you are ready.
From getting your finances in order to being able to save for a down payment, here are the ways to tell that you’re ready to take on this exciting chapter in your life!
1. You’re Ready to Plant Some Roots
Unlike renting, buying a home commits you to living in an area for at least a few years. While a great deal of our young, first time home buyers seem eager to jump into this phase of their life, they often are unsure of the city or even neighbourhood that they want to live in.
If you are unsure of the area in which you wish to settle down, it’s definitely worth spending time exploring local neighbourhoods, checking out different cities, and conducting research to get a concrete plan as to where you want to live. When, or if, you have a solid idea and feel comfortable staying in one place for a few years, then you’ll be able and ready to start your search looking for your new home.
2. Your Finances are Stable
As we’ve mentioned before, buying a home is a huge financial commitment and one that is very costly, from paying the legal fees at closing to committing to your monthly mortgage payments. To know if you’re ready to take this next step, it’s best to ensure that your finances are in order and manageable.
Take a look at all of your sources of income and current debt standing and really assess and see whether or not buying a home and taking on a mortgage (plus other monthly home expenses) is doable. You’ll also want to ensure that your credit score is in check! This is necessary for you to be pre-approved for a home.
If your finances are stable, your debt is manageable and you have good credit, then you’re in the right place to consider purchasing a home.
3. You Can Save for a Downpayment
The first large payment you’ll make towards your home is the down payment. This is something that has to be paid in-full, within 24 hours of your offer being accepted by the seller. Given the short timeline and turnaround, it is essential that you have your down payment ready to go and saved up for before you start your home search. For those who are unaware, your down payment is a minimum of 5% of your purchase price.
In addition, you’ll also have to be prepared for the other costs that are associated with buying a home, such as closing costs, moving costs, insurance, taxes, and set up fees. If you have saved up and are able to afford everything that goes into buying a home, then it’s safe to say you’re probably ready to start your search. However, if you’ve just begun to save up for these costs, then you’re definitely not ready to purchase a home just yet.
4. You Can Afford the Monthly Payments
So you’ve saved up for a down payment and have a great credit score, does that mean you're ready to buy a home? Not exactly. The other necessary item that you need to consider is whether or not you can afford the monthly payments. Some of the items you’ll have to be prepared to pay for each month are monthly mortgage payments, condo payments (if applicable), land taxes, utilities, home insurance, and wifi.
Once you’ve broken down these items, acknowledged the potential monthly spend, and assessed as to whether or not you’re able to afford them, then you’ll have a better idea as to whether or not you can afford a home. If you’ve done this and feel prepared, able, and ready to take on these payments, then you’re in the right place to purchase a home.
Only you will be able to tell as to whether or not you're ready to take this next step in your life. But, if you’ve gone through all of these steps and answered “yes” to each of them, then you’re definitely in a good place to start your search and buy a home. Congratulations!