Who Should Buy a Home?

Not everyone is in a position, financially or personally, to buy a house. Financially, it is important to have the up-front money required for a down payment, the proper credit and financial profile, and income stability to predict your ability to pay in the future. Personally, the decision to buy a house should be made only when you have a clear picture of your needs not just today but for some years in the future. Ask yourself these questions when you are considering becoming a first-time home buyer.

How Much Cash Do I Have?

You will need at least 5 percent of a home's total cost to afford a down payment. In the modern economy, it is more common for a mortgage lender to require 10 percent. Placing at least 20 percent down will assure you can avoid private mortgage insurance. With that in mind, how much could you afford to pay for your first home? Is that a reasonable sum in your area and with your needs?

How's My Credit?

The vast majority of Americans cannot buy a home without a mortgage. Due to the size of this loan, mortgages are the hardest financing to achieve. You must have a credit score of around 700 to be considered for a traditional mortgage. In addition to a high score, you will need to show a history of paying off debts, particularly large installment debts, in order to get the best rates and terms.

Do I Have Job Stability and Savings?

When you sign a mortgage contract, you commit to payments for anywhere from 10 to 30 years. Failure to make even one payment can result in the loss of your home. As a result, it is not wise to sign a mortgage if you have any doubt about your ability to pay. Job security is essential. Of course, no job is 100 percent secure. For this reason, it is also important to have a large emergency saving account. This should be sufficient to cover at least three months of all the bills you owe, plus living expenses, in the case of an emergency.

Where Will I Be in Five Years?

If you cannot answer this question with a degree of certainty, you may not be a good candidate for home ownership. If you purchase a home and then sell it in under five years, it is not likely you will turn any profit on the investment. In the worst case scenario, you will actually lose a portion of your investment. Before purchasing a home, you should be able to tentatively commit to being in the property for at least five years.

Who Will Be There with Me?

If your needs will change drastically in the five-year window, you may want to wait in order to purchase a home. For example, if you are a bachelor now but dating seriously, you may have a wife and children in five years. Instead of buying a home for your current needs, you will need to think about your future needs. If these needs are extremely uncertain, you may want to wait for home ownership until they are more established.