Taking your first steps onto the property ladder is all about timing. In today’s real estate market deciding when to buy a house can be a million-dollar question. So, it is important to crunch the numbers and check if it’s the right time in your life to take the leap into home ownership.
There are many signs that indicate a person’s readiness to buy a home. Rising rent may provide plenty of motivation to farewell the landlord and settle down into your own place. But as much as you may want to make such a move, you will also need to recognise when it may not be the right time to buy a property, at least for now.
To make a financially sound decision, it is important to be open and honest. By taking the time to look at the key indicators, you will be well-placed to determine whether to go ahead or put it on the back burner.
This article will explain what should stop you from considering the purchase, but also what entails a readiness to buy a house. You may discover that you are in a better position to make what is likely to be the largest financial decision of your life.
When are you ready to buy?
When getting ready to buy a house, consider signs that indicate your financial security, market awareness, and stability.
Sign 1: You are realistic
A lot of people can be dreamers. This might mean that they look for homes well above their budget, which would result in a higher mortgage and less manageable repayments. Finding the right property is key to a successful purchase for first-time homebuyers. Decide where you want to live and what type of dwelling. If you are aware of your financial limitations, do your search accordingly. You better position yourself to cope with the incoming mortgage and reap the benefits of a carefully planned budget.
Sign 2: You are aware of what is happening in the market
The market goes through periods of fluctuation. For example, at any given time, it may be a seller’s market or a buyer’s market. Having an understanding of the current market and local house prices will help you make a financially sound decision.
You can gain a thorough understanding of the market by talking to real estate agents and property managers. They can guide you through the process and the pros and cons of buying at certain times, in certain areas.
Sign 3: You can afford the upfront costs of buying
There are many costs associated with buying real estate. There are initial costs like stamp duty and building and pest reports as well as recurring costs like council rates. Do not forget that extra costs like moving fees and utility connections also need to be included in your financial preparation for a home purchase.
The extra costs of buying a home are often overlooked. That’s why, if you have considered these costs and have saved enough to cover them, you can likely afford the costs of homeownership.
Sign 4: You have a secure and stable income
A secure and stable job means that you can afford to make monthly mortgage repayments. Without a regular income, you might be unable to maintain and keep on top of loan repayments, as well as daily expenses, which can add up fast in the wake of a large financial decision. Therefore, having a steady stream of predictable income is a key indicator that you are financially ready to buy a home and commit to regular mortgage repayments.
Sign 5: You are ready to make the commitment
There are no rules about how long you should hold onto a property. Typically, you will need to be happy to stay put for around two years to five years to avoid losing money. You also need to factor in all the associated costs with moving and listing when you do go to re-sell. So, if you are purchasing as an owner-occupier, it is important to find somewhere you will be happy to live and make you restless to move.
The signs that you are not ready to buy
While you may be ready to move into your own home, there could be some external signals that indicate that you should be holding off on such a big financial commitment. The existence of these roadblocks might be disheartening, however, they can save you from making a purchase at the wrong time.
Sign 1: You have a low credit score
A low credit score is a significant sign that you’re not ready to buy a home just yet. This is because people with a high credit score will receive a better interest rate on their mortgage and lower monthly payments.
Sign 2: You cannot afford the deposit
When it comes to putting down money for the deposit, ideally, you should be able to afford 20%. Anything lower means you may be required to pay for lenders' mortgage insurance (LMI). This one-off payment when taking out a loan protects the lender, not the borrower. It may be your circumstances and even your occupation could make you eligible for an exemption, so speak to your lender.
Sign 3: You have only considered the sticker price
The home buying process can be quite costly. Suppose you have not considered and saved for extra associated costs such as property tax, insurance, utilities, renovations, maintenance, and even moving costs. In that case, you are not ready to buy a home just yet.
Sign 4: You may fall behind on other financial goals
If committing to buying a property and entering into a mortgage means that financial goals in other areas of your life suffer, it may not be the best decision. It is important to consider potential future factors. For example, do you plan on making any other large financial decisions in the next 12 months? Is there a chance you will have to move away in the long term, for work, for example? These are essential questions to be asking yourself when you are looking to determine if you are ready to purchase a property.
Sign 5: You find it hard to stick to a budget
You don’t have to have zero debt to purchase property, but it needs to be under control. If you are relying on your credit card to get through the month then this may be another sign to hold off buying a home. Try limiting your spending and putting money aside as if you are paying off a mortgage. This will not only boost your deposit but will give you the confidence that your financials are headed in the right direction. If you find you struggle to do this, then it may mean you are not quite ready for the long-term commitment of a home loan.
Start your home-buying journey with LJ Hooker
Buying a home is one of the most important decisions in life. However, such an important decision comes with great financial and personal responsibility. That’s why it’s not uncommon for people to take a step back and consider if they are really ready to buy a home.
Luckily, such a stressful process can be made easier. When determining if it’s the right time to buy property, there are some key signs. Once you have considered these you will feel more confident to take the next step forward.
LJ Hooker can provide invaluable expertise, market knowledge and home buying tips to help you find the property of your dreams. So when you are getting to buy a house be sure to contact LJ Hooker and connect with an agent today who will be able to help you on this exciting journey.
DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.
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