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Every renter out there has had an enduring interest in owning a home at one point in their lifetime. Some people will advise you to purchase one when the economic conditions are favorable.

However, buying a home is a significant financial investment that you should never rush into.

To help you know whether you are well prepared to become a homeowner, ask yourself the following five questions first.

Do I need to buy a home?

Different people have varied reasons to purchase a home. What you want to do with a house matters a lot. Buying a home to live in is one apparent reason while others buy for renting out. Once you know the purpose of buying a home, it becomes easy to determine the kind of a loan structure you require. You also know the best kind of a house that fits both your short-term and long-term family plans.

How much can I afford?

Knowing how much you can afford may not be easy, but you should try to understand your financial situation before you consider borrowing. Setting a 25 percent to 32 percent of your gross income to go towards your house payment is quite safe. Above that could be risky due to factors like increased insurance costs, interest rates among others. Determining what you can afford helps you to know your housing price range quickly.

Is my realtor the right one?

A good broker is one who can bat for you once you find the right house. You should have a well established financial relationship with the realtor. Don’t make the mistake of using a friend or relative realtor because that could compromise the financial relationship, causing you to make the wrong decisions. And before you seal a deal with any realtor, ensure that you interview several of them, comparing their availability and their commission structures.

Is my income reliable?

Your source of revenue need be reliable before you decide to commit yourself to buying a home. If you are employed, consider how long you have been employed, the prospects of your company, as well as your future job prospects. Think beyond the obvious and ask yourself how things would be if you lost your job.

You must have a contingency plan such as an emergency fund to be able to continue financing your mortgage in case you lose your job, or else you will need to get a rental house before you find another job.

How long will I be living in the home?

Real estate can become volatile, and you would not want to put your long-term investment at risk. The buying process requires you to show some degree of commitment. If you are to vacate your house within five years, why bother buying it? It would be better if you continued renting instead of closing the house and wait to sell it again.

Becoming a homeowner takes adequate preparation, both mentally and financially. And once you are ready, wait for the right time to plunge into home-ownership.

Don’t be like some home-buyers who let emotions cloud their judgment thereby making them overpay for their first-time homes.

 

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