How do you know if you’re actually ready to purchase a home? Today I’m going to break that down. I’ll talk through every major thing you have to consider and how to ensure you’re financially prepared to make a massive purchase of a home. Here’s the questions I ask when it comes to preparing to purchase a home.

1. Do you have all your debt paid off?
This is a big one! If you don’t have your debt paid off before purchasing a home, your home can cause a ton of financial stress because it’s yet another payment to add to your other payments. This is going to be the first thing to take care of before purchasing a home.

2. Do you have an emergency fund?
We’re talking a full 3-6 month emergency fund! Because buying a home can really create a lot of emergencies in your life, especially when the furnace stops workin in January or when the roof starts leaking in the spring. Plus it’s just a good idea to have a full emergency fund for life.

3. Do you have a downpayment saved?
The downpayment is the first major investment in your home. I’m wanting to see you save 10% at least for a downpayment. But IF you’re able to save 20% of the purchase price as a downpayment, you’re going to save on PMI. PMI stands for Private Mortgage Insurance. That’s what will be added to your payment if you don’t put 20% down on your home. And this can be between 0.5% and 1.5% of the purchase price per year!

4. How much would the home your considering cost on a monthly basis?
I recommend people stick to a payment that is no more than 25% of their take home pay on a 15 year, fixed rate mortgage. Unfortunately that’s hard to do! But it is doable. My wife and I did exactly that when we bought our home. The other things you need to consider in the payment is insurance, taxes, and potentially PMI and HOA fees.

5. Have you considered home maintenance?
If the home you’re considering is old, consider this financially. Ours was very old and needed a number of fixes, like the roof, plumbing, insulation and the furnace all needed work or replaced. Then there will be other emergencies. This is another reason to have an emergency fund!

Timestamps:
0:00 - Intro
0:26 - Question 1: Consumer Debt
0:55 - Question 2: Emergency Fund
1:26 - Question 3: Downpayment
2:50 - Question 4: Monthly Payment
4:12 - Question 5: Home Maintenance

#calebbale #homeownership #homebuying

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