You just paid the rent…again. And you know that when it comes time to renew your lease, the monthly rent will increase…again. Maybe it’s time to stop renting. Here’s how to know when you’re ready to buy a home.

Let’s break it down to two separate readiness requirements for buying a home. The first is being financially ready—having the ability to both buy a home and afford to maintain it. The second criteria is your personal readiness—being emotionally and mentally prepared for the responsibilities that come with homeownership.

The financial readiness signs

What’s your financial situation? Review these signs to determine whether you can afford buying and owning a home of your own.

You have the down payment.

Have you been told you can only buy a home when you have a 20% down payment? If that’s the detail that’s preventing you from pursuing your dream of owning a home, there’s good news.

The average down payment for a first-time homebuyer is just 8%, according to the National Association of Realtors. The amount depends on your credit score and the type of loan you’re considering.

If you qualify for a government-insured loan, you might only need a low down payment to buy a home—or none at all. The Department of Veterans Affairs (VA) or US Department of Agriculture (USDA) both offer home loans with zero down payment for qualified buyers. The VA home loans are for veterans, active service members, and eligible surviving spouses. USDA home loans provide 100% financing for income-qualified buyers of property in USDA-approved rural and suburban areas.

The Federal Housing Administration (FHA) offers home loans with a down payment as low as 3.5% for first-time homebuyers.

These government-insured programs also offer competitive interest rates for the mortgages.

Even conventional loans have flexibility with the down payment to buy a home. The amount required will depend on the location where you’re buying, the price of the home, your creditworthiness, and the type of loan program.

One caveat: If you put less than 20% down at closing, you’ll be required to purchase private mortgage insurance (PMI). This fee is a premium included in your monthly mortgage payment. The fee varies, but you can expect it to be between 0.46 and 1.5% of the loan amount.

Your credit is strong.

The best way to confirm that you’re ready to buy a home is to talk to a lender about mortgage pre-approval. With this step, you’ll learn how much of a loan you’re likely to be approved for. It’s not a 100% guarantee—more like an educated presumption—but having that pre-approval letter shows a seller that you’re a serious buyer.

The first action a lender will take in assessing your financial readiness is to check your credit history. If you’ve ever borrowed money—such as a personal, student, or car loan—or used a credit card, you have a credit score. There are three major credit reporting bureaus that gather financial information: Experian, TransUnion, and Equifax. These credit bureaus collect data from lenders—which can also include utility companies and landlords—about your borrowing and payment history. From this data, they assign you a credit score, between 300 and 800. The higher the number, the better your borrowing ability.

A good credit score to qualify for buying a home is 720, but some loan programs (like FHA) will accept a lower score. Be prepared that lower credit scores could cost you by charging a higher interest rate, because the lender sees you as a risky borrower. Having a good credit score is a strong indicator of how to know when you’re ready to buy a home

Before you go to one, two, or all three credit bureaus to check your score, you should know that inquiries can lower your score. These companies may see your request as coming from a potential lender, which means you’re about to incur more debt.

Everyone qualifies to receive a free credit report once a year with no impact on your credit score. Applying for a credit card could lower your score by as much as 10 points, so be watchful of your credit activity when you’re planning to buy a home.

You have a secure income.

You should have a stable source of income when preparing to buy a home. Avoid changing jobs because lenders want to see that you’re settled into a job, a place, and a reliable revenue stream. You’ll be asked to show your income and employment history. So, if buying a home is n your near future, manage your employment and revenue stream.

Your debt is manageable.

Your credit report shows a debt-to-income ratio (DTI). This number reflects the relationship between what you owe and what you earn. The lower the DTI, the better you will fare with lenders.

Your debt is the sum of your outstanding loans and credit balances, plus rent and other required payments, like child support. Income includes your salary, freelance income, bonuses, social security benefits, rental property income, alimony, and child support. Lenders look for a DTI of 43% or less. If you fall within this parameter, you’re in good shape.

You can afford the total cost of ownership.

Remember, the mortgage is only part of the expense that comes with owning a home. Your mortgage includes the loan principal and interest. It might include property taxes, homeowner’s insurance, and homeowner’s association fee (if relevant).

Consider the total cost of ownership. You should develop a comprehensive budget that includes other ongoing expenses, like maintenance, utilities, and repairs. Things like lawn care, HVAC maintenance, roof repair, and replacing outdated or broken systems or appliances need to be accounted for in your budget. Rule of thumb is to plan a home maintenance fund that’s equal to 1 to 4% of your home’s value. For a new construction home, your budget will be on the lower end, because your home—including structure, systems, and appliances—is covered by the builder’s warranty.

Renting is too expensive.

Unless you’re one of the lucky few, your rent goes up every year. And what do you receive in return for the payment? A place to live. Meanwhile, you’re covering the landlord’s mortgage—and then some.

Rent is an expense. A mortgage payment is an investment. Rent rises. The mortgage payment stays the same if you have a fixed rate mortgage. The only thing increasing with your home is its value!

The personal readiness signs.

Now that you know your financial readiness, gauging your personal situation is another part of the equation for how to know when you’re ready to buy a home.

Your life feels stable.

Buying a home is a commitment— not just financial, but the care and feeding of it. Like any serious commitment, you don’t make it on a whim.

You should be comfortable with your life—like relationships, work, and hobbies. You can see where your future will lead you. And a home of your own fits nicely in that picture.

You’re ready for the responsibility.

Are you comfortable with tackling a “To Do” list? Do you mind spending some of your free time on chores like pulling weeds, fixing a leaky faucet, or painting a room? Having the handyman skills, the money, and the time will be essential to protecting your investment, particularly if you're buying a resale home or fixer-upper. 

Even if your home doesn’t require repairs, you’ll still need to handle basic maintenance, like cleaning out the gutters twice a year, checking air filters, raking the lawn and garden, cleaning outdoor living spaces, and checking doors and windows for leaks. Here’s a seasonal home maintenance checklist that will give you an idea of what you’ll need to do.

You’re excited.

Are you hesitating at all? While it’s normal to be nervous about making such a large financial commitment, take a good look at your excitement level about the prospect of having a home of your own. Does your mind fill with ideas on what you’re going to do, like decorating for the holidays, entertaining, and how your furniture will look? Do you envision relaxing in your yard after a busy day or week? Can you picture yourself working in a bigger kitchen with more storage and workspace?

If these ideas spark bursts of energy, you can be sure you’re ready to buy a new home.

You know what you want.

What else is an indicator you’re ready to buy a home? You have a good idea of the home you want and where it should be.

What type of home fits your lifestyle? A townhome? Single-family home? Do you want single-level or multi-story living? How many bedrooms? Do you need a fenced-in yard?

Create a wish list of details for your new home, and prioritize them. Use this as a checklist when you’re shopping for a new home. Be clear on what matters most and what you can live without so you can prevent a bad case of buyer’s remorse.

Ready, set, go!

You’ve figured out how to know when you’re ready to buy a home. Is your new home search focused on the Raleigh, NC, area? New Home Inc. is building communities of new homes for sale near Raleigh, in Lillington, Fuquay-Varina, Smithfield, and Willow Spring, NC. Our townhomes and single-family homes are designed and built for the way you want to live today and in the years ahead.

New Home Inc builds every home with our “Future-Proof” approach. We include features that you might not have even thought to request—and that many builders charge extra to add. In addition to flexible floor plans that allow you to personalize your home, we offer these innovative, smart, and healthy home features.

• Smart home automation is part of your life now. Don’t you want a home that doesn’t need to adapt to your technology but includes it? We leverage the technology for your security (with a video doorbell and smart lock), convenience (smart home network panel), and energy efficiency (smart thermostat). 
• Our Smart Door Delivery Center is a fully enclosed, climate-controlled space between your exterior and interior front doors. Using a one-time code, the delivery person is authorized entry only to the delivery space. The door automatically locks afterward. Your package is safe from all the outdoor concerns!
• We include an oversized kitchen island with seating on three sides, not just one or two.
• Our floor plans also feature a separate service pantry—which we call a “messy kitchen” adjacent to the kitchen and separated by a door. The messy kitchen can be outfitted with cabinets, countertops, a sink, dishwasher, mini fridge, or other features to make it more useful to you. You can use it to store small appliances, servingware, and other things you use occasionally. Even set up a beverage station to keep that activity out of the main flow in the kitchen.
• New Home Inc. builds each home according to the specifications of the ecoSelect Home Efficiency Program. Certified by a third party to ensure objective, professional analysis, each home is built with energy efficient lighting, low-flow water requirements, high efficiency HVAC, and advanced air sealing and insulation.
• The whole home air filtration system protects the quality of the air flowing in and through your home. The filters capture microparticles that can collect in a well-insulated home. So, you get the benefits of both energy efficient insulation and high indoor air quality.
• An electric vehicle charging station rough-in is included in your garage. Having this pre-installed makes it easy to finish this feature whenever you’re ready.
• CAT6 cabling is wired into every home. This choice delivers a higher standard that provides strong, reliable connections without dead zones. CAT6 cabling is an important feature for households with multiple people using a variety of devices that put high demand on your network and connectivity.
• Our pet spaces include a grooming station option and a nook built into the wall under the stairs, so your four-legged family member has a place to call “home”, too.

Are you ready to buy a new home in the Raleigh, NC, area? New Home Inc. has quick move-in homes for sale near Raleigh right now. Take your pick of completed homes and those under construction. Or let us build one for you! Contact New Home Inc. to plan a tour of our communities, furnished models, and new construction homes for sale near Raleigh.