How to Know if You’re Ready to Buy a Home & Real Estate – Home Buying Course Session 1

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There are many factors in figuring out if you are ready to buy a home. In this session, we will explore how you will know for CERTAIN if the timing is right for you to buy a home.

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Keep the End in Mind

 

“I know where I’ve been, I know who I am and I know where I’m going.” – Jimmy Valvano

 

This resonates strongly with me. The reality is the past has already happened so nothing can be done about it. However, the present and the future are created by your decisions.

 

With all that being said an important thing you need before making any life-changing decision (like buying a home) is being self-aware and having an intimacy with yourself.

 

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Does staying in the same living space for 5 years make you anxious?

Are you ready to clean, repair and fix (or hire someone) to take care of your home?

 

Again, being aware and sensitive to how you REALLY are today and not what you see as your IDEAL self is necessary for making a decision of this importance.

 

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Some other questions to consider are:

 

How big do you want your home?

What zip code or school district do you want to live in?

Will your family grow in the coming years?

How far away from your job are you willing to live?

 

Get the Facts of Your Finances

 

When I talk to coaching clients when they are considering buying a home one of my first questions is: “when was the last time you pulled your full credit report?” I am usually met with a couple responses.

 

“When I bought my car three years ago.” or “I haven’t in years.”

 

Both answers are unhelpful.

 

I wrote a post on how to pull your credit report from all three bureaus for free here.

 

Do that first before any other financial number crunching.

 

Don’t be hopeful about your finances. Hopefulness is one reason we put ourselves through the 2008 mortgage financial crisis.

 

I’ve written several posts to gauge financial readiness.

 

How to Financially Plan the Year and Live Stress-Free About Money

How To Get Your Credit Score For FREE from Creditsesame

What to Ask Yourself Before Buying Your First Home

 

Anyhow, the short of the matter is you need to look at your financial facts. Now, what you “think” or what you “hope for” the facts are what matter here.

 

Take a few days to get all your financial information in one place.

 

Now you can begin the real estate journey with the facts.

 

First Things First

 

Before even considering buying a home I implore you to establish and maintain an emergency fund. But not 3 months. I encourage between 6-9 months for an emergency.

 

Some may say that is conservative but take it from a guy who bought a home and 5 months later lost his job.

 

Now, I did NOT have an established emergency fund. This caused much scrambling and unnecessary stress in my life.

 

Before even considering real estate have an established emergency fund that you do not rely on for anything but a 911 emergency.

 

Down Payment

 

You need 20% down for a conventional mortgage (in most cases).

 

So if you’re looking at buying a $200,000 home you need $40,000 saved to avoid PMI.

 

Evaluate Rent vs Home Owning Costs

 

Rats, leaks and home damage are now your responsibility. Lucky you! So whenever there are any issues YOU are the landlord and YOU can call YOURSELF for all of that.

 

In reality, there are a few main differences between renting and owning.

 

  1. Home insurance (necessity if you have a mortgage)
  2. Property taxes (0.5%-2 depending on your local government)
  3. Home repair and maintenance (approximately 1% per year of home value)
    1. 200k home will most likely need $2k of maintenance yearly

 

Conclusion

 

Three things I say are necessary to move forward with real estate

 

  1. Stable income
  2. Emergency fund (6 months)
  3. 20% saved for a down payment

 

If you have these three, you are quite on your way to being a homeowner!

 

What other things should one consider?

What are your thoughts on having the 20% down and evading the PMI?

What more should be discussed?

 


Make sure to check out Session 2: How Much Home Can You REASONABLE Afford?

 

Always Moving Forward,

||| Max

 

 

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As a certified credit counselor and syndicated writer at MaxMyMoney, Max has coached over 250 Millennials to help take the stress out of money. When Max is not coaching, you'll find him reading financial books, indoor cycling, or visiting local pawn shops looking for swiss-made watches.