5 Ways to Tell You're Really Ready to Buy a Home

I've spent the last two years paying off debt and putting money aside to finally become a homeowner again. I have had many moments of wondering, "Am I truly ready?" If you're pondering the same question, this article's for you. Here are five ways to know if becoming a homeowner is desirable and doable for you.

1. You don't have a lot of high-interest debt

While you certainly don't have to be completely debt free to buy a home, some kinds of debt are more conducive to the process than others. If you're paying off your education or financing a car with an affordable monthly payment, you're likely not in a bad position to become a homeowner.

But if you have a lot of debt on credit cards, you could be paying 20% interest or higher -- according to the Federal Reserve Bank of St. Louis, the average credit card APR on accounts assessed interest was 22.75% in November 2023. Mounting credit card bills will make it harder to afford a mortgage and all the other expenses of owning a house, so it's a good idea to explore ways to pay off this debt beforehand.

2. You have emergency savings

Living paycheck to paycheck and being a homeowner isn't ideal -- you're just one busted water heater or leaking roof away from potentially taking on more high-interest debt to pay for repairs. As such, it's a good idea to ensure you've got some financial breathing room before going down the path of homeownership.

During my first disastrous experience owning a home, I very much did not -- which is why I ended up immediately unable to afford my mortgage payments when I got laid off from my job. Long story short, getting rid of that house in a short sale tanked my credit and made me swear off even considering buying a home again, for years. Don't be like me that first time -- build emergency savings before you investigate mortgage options.

3. You can cover the upfront costs

Buying a home comes with some pretty significant upfront costs. While a 20% down payment is recommended (as it can help you avoid paying for private mortgage insurance on a conventional loan), it's not required. If you've got strong enough financial bona fides, you may be able to get away with a 3% down payment. And some government-backed mortgage options (like FHA and VA loans) have low or zero down payment requirements.

That said, putting some amount of money down for a home purchase is a good idea, as it'll make you a less risky borrower to a mortgage lender and save you a ton of money on interest over the life of the loan. You've also got to cover closing costs, moving costs, and let's be real, probably some new furnishings for your new home. Can you afford all these expenses? They're only the beginning.

4. You've explored ongoing expenses

After the ink has dried on your mortgage paperwork, the costs just keep on coming. You'll need to pay for property taxes, homeowners insurance, and ongoing maintenance and repairs for your new home. If you live in a homeowners association neighborhood, you'll pay those fees too. And a lot of these costs will rise over time.

I recommend doing some research to find out how much you can expect to pay for ongoing expenses, because they will shape your budget for years to come. If you can handle them, buying might be right for you.

5. You actually want to go from renter to owner

Renting has some perks -- on average, it's cheaper than owning a home. It's also a lot more flexible. But it doesn't allow you to change your living space in any significant way. I've noticed that unlike my last time buying a house, I'm excited at the prospect of painting walls, installing central air conditioning, and changing out major appliances.

Plus, I have three cats. Thanks to many irresponsible pet owners who've ruined things for the rest of us, it can be difficult to find a decent rental that accepts pets and doesn't charge you an arm and a leg for the privilege. I'm already making a Chewy wishlist for cat shelves and window beds that should soften the stress of moving again for my furry freeloaders.

I'm also looking forward to having control over how I address any problems that come up with my home -- if the kitchen sink is clogged, I get to be the one to call the plumber, rather than going through a landlord. This also means I'll be paying for that fix, of course, but this makes me feel empowered, rather than scared (OK, I'm a little scared -- but that's to be expected).

Is it time for you to become a homeowner? Good luck out there -- the 2024 market so far is no more favorable for buyers than 2023 was, thanks to stubbornly high mortgage rates and a low supply of homes for sale. But if you can say that most of these signs apply to you, you just might be ready to buy.