As a real estate agent who works closely with homebuyers and mortgage lenders, I’ve come across several indicators that point to whether or not someone is ready to purchase a home. Following are the top five signs indicating that you are not ready to purchase a home. Some of these will be obvious, but it seems there are still a lot of people out there who don’t get it.
- You do not have any money saved, at all. Even if you get a mortgage offering 100% financing, you still need money for earnest deposits, inspections, appraisals and closing costs. You’ll also need money to move, buy appliances, and possible pay deposits to turn on utilities. Not having any money saved indicates that you’re living paycheck to paycheck, which is dangerous and can be a financial catastrophe. If you want to buy a home in Philadelphia, you should have at least $2,000 saved in a checking or savings account.
- You do not have any income. You can’t get a mortgage if you don’t have income. Even if you are paying cash for a home, you still will have the ongoing expenses of homeowner’s insurance and real estate taxes. You need income to cover those expenses.
- You have not paid bills on time in the past 12 months. When a mortgage lender checks your credit history, they want to see that you pay your bills on time. The way they see it, if you can’t pay a small car payment on time, you won’t be able to pay a mortgage on time either.
- Your credit cards are maxed out. Ideally, you should be paying off credit card balances every month. If your credit cards are maxed out, that’s a sign that you are living on borrowed money, which is a bad habit. Get your credit card balances down to at least 30% of the credit line, or pay them off completely.
- You don’t want to have to fix anything. Once you become a homeowner, you are responsible for fixing anything that breaks in the home. If you still want to be able to call the landlord and not worry about it, you’re not ready to be a homeowner.
Do any of these signals apply to you? If so, you may want to either reconsider buying a home at this time, or ask me how you change your situation so you can become a homeowner.