How to Know if You’re Ready to Buy a Home
Buying a house is a big commitment, so before you start house hunting and comparing mortgage rates, take the time to examine your current situation and how it could change in the future.
How long do I need to own my house before it pays off?
Generally, we recommend you only consider buying a house if you plan to live there for at least five years, but this depends on a lot of factors, like the housing market, rental prices and how much equity you have in the house.
Each option has its benefits, so consider what matters to you.
Buying a home is one of the largest purchases you’ll likely make, and it’s important to make sure your financial house is in order. Start by reviewing your bank accounts and billing statements to get a handle on how much money you’re making and spending each month. If you’re planning to buy a house with someone else (like your spouse), review their finances as well, and then ask yourself some questions:
Your down payment is cash you’ll pay for the home at closing. The minimum requirement for your down payment varies based on the type of loan you get and your financial situation. FHA loans require a down payment of at least 3.5%, while conventional loans typically require at least 5%. Some first-time home buyers can qualify for a conventional loan with a 3% down payment. The more you put down, the lower your monthly payment and interest rate will be.
Along with your down payment, you’ll also pay closing costs, which are fees associated with processing and securing your loan. Closing costs can vary depending on the price of the house and the type of mortgage, but they’re generally between 2% and 5% of the home’s purchase price.