4 Signs You're Ready to Buy a Home

Buying a home is a big undertaking. Here are a few indicators to let you know you're ready.

There are plenty of good reasons to buy a home -- financial stability, the chance to own an asset that can gain value over time, and the ability to make your own decisions instead of following a landlord's rules. But buying a home is a huge financial step, so it's important to go in prepared. Here's how to know if you're ready.

1. You've saved for a reasonable down payment

Though some mortgage lenders will accept as little as 5% down on a home for a conventional loan, many require a minimum down payment of 10%. And it's not unusual for a lender to demand 20% down -- which is also good for you as a buyer because it means getting to avoid the ongoing expense of private mortgage insurance. If you already have enough money on hand to put down that 20%, it means you're in a good spot to buy. And the fact that you've saved that much means you're probably a disciplined spender who knows how to manage money.

2. You've run the numbers to see what you can afford

Some people embark on a home search without really knowing how much house they can afford. But if you've already crunched the numbers and have come up with a price range based on your income and other bills, then you're in a good place to buy. Ideally, you won't take on a mortgage that will require you to spend more than 30% of your take-home pay on housing expenses, including property taxes and homeowners insurance -- so hopefully your numbers align with that guideline.

3. Your credit score is solid

It takes a minimum credit score of 620 to qualify for a conventional mortgage. But you'll generally want to aim higher than that for one big reason: The higher your credit score, the lower the interest rate on your mortgage is likely to be. In fact, to snag the best rates available, you'll generally need a credit score in the mid-700s or higher. If your score is at that threshold, it means you're not only likely to lock in a good deal on a mortgage, but you're also the type of borrower who's likely to have a relatively easy time managing a home loan.

4. You don't have a lot of debt hanging over your head

Though mortgage debt is considered the healthy kind to have, it's debt nonetheless, and falling behind on it could have severe consequences -- including credit score damage and the potential to have your home foreclosed on. But if you don't have much debt, you're probably in a good position to buy a home. After all, if your income isn't being monopolized by other expenses, you should have an easier time making your mortgage payments.

If you buy a home before you're really ready, you could end up in a world of financial stress. But if the above circumstances apply to you, it means you're in a solid position to start a house hunt and begin filling out mortgage applications.