With mortgage rates trending up, it may be the right time to give further thought to the question, "Is homeownership right for me?" How do you know if you’re ready?
While homeownership is an exciting milestone in your life, it’s important to educate yourself on the financial implications of buying before you make an offer. Whether you’re a first-time homebuyer or a current owner looking to sell or refinance, there are a few key questions that should help guide your decision.
6 Questions About Homeownership
1. What are the pros and cons of owning vs. renting?
Owning a home is certainly a more long-term commitment. Recent studies show the average homebuyer lives in their home about 9 years. While homeownership offers many benefits - like building equity, creative freedom, stability and tax breaks, owning also comes with risks. Some of the ownership risks include potential financial loss, responsibility for repairs and maintenance, and higher upfront costs.
Educate yourself on the costs and benefits of owning a home before you make an offer.
2. Am I ready for the responsibilities of homeownership?
While property is generally considered an appreciating asset and worthwhile investment, home values are tied to economic conditions. Having your "financial house" in order is an important first step to buying a house. Evaluate questions like these to determine whether you are ready for the responsibilities of ownership:
- Are you confident in your ability to pay your bills on time?
- Are you able to budget for unanticipated costs?
Here are a few tips on how to budget for monthly household expenses.
3. How much home can I afford?
Determining how much home you can actually afford goes beyond the list price of a property. Other factors that will affect your monthly payment include interest rates, taxes, insurance, income, debt, monthly expenses, and maintenance costs – just to name a few. While there are numerous “affordability” calculators out there, it’s important to first understand the whole picture for your personal situation.
Before you buy, take action to determine how much home you can afford.
4. How will lenders evaluate my mortgage readiness & make loan decisions?
Are you familiar with the “Four C’s of Loan Credit?” Lenders look at a number of factors to determine the terms of a mortgage loan:
- Credit Score
Consider reviewing your financial history and educating yourself on the qualifications lenders use to determine the terms of your loan.
5. How will my credit score impact my ability to buy?
Your credit score and the information in your credit report are key factors in whether or not you’ll be approved for a mortgage and at what interest rate. When was the last time you checked your credit?
Learn more about the myths of credit scores, as well as steps you can take to build strong credit.
6. How should I prepare?
If you believe you are ready to buy a house, there are a few ways you can prepare. Start by paying off small debts. Not only will this have a positive effect on your credit score, it will give you some peace of mind as well. Next, you’ll want to get your pre-approval letter before you even start looking at homes. Your pre-approval will tell you exactly what you can afford – and narrow down the choices for you. Finally, find a good real estate agent you can trust. A trusted agent will work alongside your lender and help you through the seemingly unending paperwork, inspections, closings, and hassles that come with buying.
Learn more about how to prepare to buy a house.
Where to Start with Your Lender
No matter what stage of homeownership you are exploring, expanding your knowledge about the key financial questions to ask when buying a home will help you make a long-term decision that benefits you.
At Community First Credit Union of Florida, we are committed to walking you through the home buying process. One of the ways we can help you feel more confident in your decision is through our free moveUp eLearning course. You can explore educational courses on homeownership, mortgages, and much more.
You can also download our full home buyer’s toolkit for even more resources.
Get the Home Buyer’s Toolkit