Maybe you're tired of paying rent or maybe you've had your eye on that cute house in your favorite neighborhood. If you're thinking of taking the plunge into homeownership but you're not sure if you're ready, take a minute to ask yourself these five key questions and consider if you need to make any changes to reach your financial goals.
1. Can you afford a down payment?
Common wisdom recommends buyers have at least 10–20 percent of the purchase price saved up for a down payment, which can be a substantial chunk of change. However, there are loan programs out there that require only a 3 percent down payment and others that offer down payment and closing cost assistance, which can greatly reduce your upfront cost to purchase a home. CHFA has programs available to assist you with the down payment and closing costs. Do your research and learn what similar programs are available—homeownership might be more accessible than you think. Keep in mind that the more you pay upfront, the less you will owe on your mortgage.
2. Are your finances in good shape?
If you currently struggle to pay your bills on time, buying a house will only add to your financial stress. Make sure your debts are low or non-existent and know your credit score before you begin to shop for houses. Often, the better your credit score, the lower the interest rate you might get on your mortgage loan.
3. Is your income stable?
Almost no one can pay for a home upfront, which means you'll have to finance the rest with a mortgage. When mortgage lenders check your employment history, they're looking for a stable candidate (generally at least two years in a job) who will be reliable with payments. If your job situation is unstable or you're thinking of changing careers, now may not be the best time to invest in buying a house.
4. Can you cover miscellaneous expenses?
Moving expenses, homeowners association fees, and closing costs (not to mention the cost of furnishing your new home) can add up fast. Make sure you've prepared some financial padding to cover these expenses.
5. Are you ready to stay put?
To really see a return on investment in your home, experts recommend staying for at least five to seven years. If you decide to sell your home sooner, you may lose money because the house's appreciation won't have time to catch up to the money you invested in the property.
If you answered yes to all or most of these questions, congratulations! You may be ready to take the next steps toward becoming a homeowner! Still feeling shaky? If you have a steady income but are nervous about scraping together enough savings for a down payment, CHFA might be able to help. With CHFA's down payment and closing cost assistance programs, your dreams of homeownership may be within reach.