8 Signs You’re Ready to Buy Your First Home

Becoming a homeowner is a huge step; it’s likely the biggest purchase you’ll make in your lifetime. So how do you know if you’re truly ready to take the leap? Understanding your financial situation, the housing market, and your personal aspirations can help you assess whether it’s time to buy.

To help you determine whether you’re ready to buy a home, experts are sharing their top tips. See where you stand on the key points below and identify any areas you need to work on in the process.

1. Your Credit Score Is Good

A good credit score makes buying a house more feasible, so it’s smart to know where you stand. Cynthia Meyer, a certified financial planner with Real Life Planning, recommends regularly keeping tabs on it. You can track it through your bank or credit card, on an app like CreditKarma, or by running a report annually at AnnualCreditReport.com—all free options.

Take care of any problems that could be affecting your numbers, and work to boost your score ahead of mortgage shopping to ensure the best rate possible. A score of 760 or above typically earns you the lowest interest rate the market offers. A credit score lower than that won’t necessarily prevent you from getting a loan, but will likely cost you.

2. The Rental Math Doesn’t Add Up

Renting has its perks (such as the landlord performing maintenance repairs), but it isn’t always the smartest financial option. “If you’re doing the work of a homeowner, you might as well be earning equity, am I right?” says Daniel Harbuck, a realtor and founder of Helpful Realty, a real estate benefit corporation.

Depending on the market you’re in, rent prices could be similar to—or even more expensive than—mortgage prices in your area. Even if that’s not the case, there’s the simple fact that paying a mortgage (rather than rent) can help you own your home over time.

3. You’ve Saved for a House

If you’ve decided buying is the smartest option, you’ll need to be sure you have enough saved for a down payment, closing costs, and maintenance costs.

Meyer recommends you shoot for the bare minimum of 5% of the home’s purchase price for a low downpayment mortgage, plus closing costs (up to 5% of your loan amount, due at purchase), as well as a year’s worth of estimated maintenance costs. Plan on these being about 1% of the purchase price, if your home was built in the last 30-40 years (you’ll likely spend more if it’s older). This can help with moving costs, such as initial repairs or decor purchases, and serve as a starter maintenance fund.

4. You’re Unfazed by the Housing Market

The housing market is, simply put, unpredictable. If you have your finances in order, and you feel mentally ready for homeownership, it might be time to start house hunting (rather than wait out rates or home prices).

“I love sharing market insights to help people buy the right time, but waiting for perfect market conditions could actually end up costing you more in the long run,” Harbuck says.

5. You Have a Solid Grasp on Your Budget

It’s important to set your own budget before heading to the bank, as they might approve you for more than you’re comfortable borrowing, cautions Meyer. Remember that your mortgage payment will includes taxes, home insurance, and potentially even mortgage insurance, too, if you don’t put down 20%. You can get a pretty good idea of what you’ll pay with an online mortgage calculator.

Then, factor in things like utility costs, which will likely be higher than your current payments if you’re renting a smaller space. You can ask local utility companies or the current homeowner for estimates. 

You’ll also need to set aside maintenance savings every month. Meyer says about 1% of the purchase price, divided by 12, is a good rough estimate. “There are always unexpected costs,” she says. “We know they’re going to happen when you own a home, we just don’t know when.” Don’t forget to factor in non-house-related savings, like retirement and travel funds.

6. You’re Ready to Feel Grounded

“[Homeownership] is proven to be one of the things that leads to long-term stability in life, and not just financially,” says Mike Smith, owner-agent-broker at Anderson Realty. He views the many necessary homeownership tasks such as lawn-mowing and garage-tidying as meditative and enriching, more deeply connecting you to your home and the community. “I believe that stewardship of a home is like a relationship with a person in that when you give to your place, it gives back,” Smith says.

7. You’re Comfortable Taking Out a Loan

Lenders will base their decision in large part on your debt-to-income ratio (DTI), so you might as well determine that yourself ahead of time to get a better understanding of your situation. Add up monthly debits, such as education loans, credit card payments, and car payments, while leaving out things like monthly bills and groceries. Divide those debts by your pre-tax monthly income, then multiply by 100. This is your DTI.

Mortgage lenders typically like to see a DTI of 36% or lower, though higher doesn’t auto-disqualify you. Meyer recommends that to be sure, you also connect with a mortgage broker for a soft pull on your credit, so they can confirm your loan-worthiness and give you a likely loan range. Plus, you’ll need a good broker to get you a pre-approval letter if you decide it’s time to buy.

8. You’re Mentally Ready

If you’re continuously scrolling real estate apps, amassing dream home-themed Pinterest boards, and reading up on mortgage rates, you might be ready to take on homeownership. If the idea of becoming a homeowner excites you, and you feel confident in your financial situation, it might be time to start thinking more seriously about making the leap.