When Are You Financially Ready to Buy a Home

Many times people start the home-buying process by asking the questions, "How much house can I afford?" This is usually the wrong question. The better question should be, "Am I at a healthy place financially to do this?" Here are 4 questions to help you answer that major one. 

1. Do I have an emergency fund in place?
• What happens when the washer goes out? What happens when the car's transmission goes out? You need to have some type of fund in place for when the "unexpected expected" happens.
• We encourage you to have an emergency fund of 2 to 9 months worth of bare bones expenses. If you have a home, then you want to make sure that you have an emergency fund that can cover your mortgage for several months in case you lose your job. 
2. Am I including all of the costs of owning a home in my budget?
• Purchase price, closing costs, house maintenance costs, increasing property taxes, etc. are all costs that we often don't calculate when just looking at the sales price of a house.
• When buying a home there are costs that you don't have to pay when you are renting that can blow your monthly budget right out of the water! You think you hate renting? Well, you will hate living in a house that you can afford, I promise you. 
3. Can I rent for a period of time while saving, so that I will be at a more secure place financially?
• While you are not having to pay all the expenses to upkeep your own house, put this money aside into a savings account. 
4. Can I actually afford this?
• We encourage people to keep their house payments anywhere from 25% to 35%
• Also, pay as large of a down payment as possible- with a goal of 20% or more (while still retaining an emergency fund)
• Have enough money to pay for the closing costs and fees with cash- otherwise you will be paying this out over 15 or 30 years with interest
• The purchase price should be no more than two-and-a-half times the family's gross annual income- but using only the main breadwinner's income

Remember when looking to buy a home: don't go at it alone. Proverbs 24:6 says, "for waging war you need guidance, and for victory many advisors." You need the input of a handful of people whose wisdom you can trust and who have your best interest in mind (not including a real estate agent or mortgage lender).