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Before asking how to buy your first home, ask yourself these 7 questions to see if you’re truly ready. Just because you’re tired of “throwing away money in rent” doesn’t mean you’re ready to buy your first home. Jumping too fast into home ownership can be an expensive mistake.

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Buying Your First Home
Should you buy or rent?

Answer These 7 Questions Before Asking

How to Buy Your First Home

Tired of renting and moving every year? Or living in a 1990s dwelling you can’t modify? Or dealing with a landlord? You’re not alone. But does that mean it’s time to buy your first home?

Ask yourself these seven questions before you start asking how to buy your first home. Because while society permits you to drive at 16, vote at 18, and drink at 21, there are no hard and fast rules for when to buy your first house. It’s a very individual decision.

The answer to the question of when to buy your first home is… “It depends.”  They say happiness is buying your first home. But that joy can turn to regret if you’re not ready. So first, you should sit down and answer these key questions.

The market may be lit up and growing like gangbusters. Or it may be down in the dumps, presenting unprecedented buying opportunities. Neither necessarily means the time is right. Before asking how to buy your first home, first ask these seven key questions:

1. Do you have enough cash on hand?

Buying a house has major repercussions for your finances. It involves many upfront costs – closing costs, down payment, moving expenses, furniture, improvements, and other incidentals. Plus, if you don’t put down at least 20%, you’ll also pay an extra fee called PMI, or Private Mortgage Insurance. 

Ask yourself: Do you have enough cash? Not just one-time upfront costs. But also for your monthly mortgage payment, including taxes, homeowners’ insurance, and any HOA (home owners association) fees.

Experts also advise you to allot 1% of the value of your home each year on maintenance. For a $250,000 house, that’s $2,500 a year, or $208 per month. Be sure to factor maintenance in. 

Money is a key question to ask about before asking how to buy your first home. 

2. Can you get a mortgage?

Saved enough cash for your upfront costs? Now, what about your credit? Do you know what your credit score is? The most competitive interest rates only go to buyers with credit scores above 700.

It’s no secret that getting a mortgage isn’t the slam-dunk it used to be. Lenders today scrutinize all documentation of your income, debts, assets, and liabilities. They’ll ask for stuff you hardly even knew existed. They definitely won’t let you surpass the 43% maximum debt-to-income (DTI) ratio – which is all debt combined, as a percentage of your income. And you might not even want to go that high, if you want time and money in your life to do other things.

Check your credit score, pay down your debts, and doubly prepare financially before you start visiting open houses. See how to boost your credit rating here.

3. Do you plan to live there at least five years?

Personal finance experts say you shouldn’t buy a house unless you plan to stay in it at least five years. 

In our case, frequent moves around the country have cost us some serious money. Anything less than five years, and you have little hope of recouping the expenses of buying and selling. Avoid it as much as possible. Tell yourself that your wanderlust is a dream-slayer… because it is.

In addition, your first few years of mortgage payments go primarily to interest. The needle barely moves on your principle. Which keeps you from building equity in your home. If you plan to move in the next couple years, you’re smarter to suck it up and rent until you’re in a position to buy for a longer time horizon. Envision your current and future household. Things can change. Will this house still be adequate for your needs three or four years from now?

If you won’t stay in your new home for at least five years, you should postpone the question of how to buy your first home. 

4. What kind of place should you buy for your first home?

Before you ask how to buy your first home, ask the preliminary question of what type of place you should get.

Do you travel a lot? If so, and you’re never home to maintain a place, you might enjoy condo living. Also, if the thought of mowing the yard gives you a headache, consider a condo. Or else consider hiring a mowing service if money permits.

Incidentally, when you calculate the cost of a condo, be sure to factor in association fees. We’ve seen fees range around $1,000 per month in some Florida communities. You have to find out what the fees cover — cable, Internet, golf, pools… Because while you may eventually pay off your mortgage, your association fees never go away. 

Do you have pets or kids? If so, a place with a yard for them to romp and play might be more to your liking. Same goes if you want a thriving garden spot or a personal recreation space.

Another question: What’s your preference… the hustle and bustle of the city or the relative calm and quiet of the exurbs or country? Your money may go farther in the exurbs and even farther in a small town. But it’s not worth it if you’ll hate it there. It’s a very personal call.

Decide what type of place you want. Then project out five years. Will it still be suitable if you have major shifts in your life two or three years from now (marriage, children, job transfer…)? If all your lights are all green, calculate the amount you can afford to spend on a home and determine what areas of your city have housing in your price bracket.

5. Are there affordable homes for sale in your area?

This is an important question – especially if you live in a very expensive coastal area where half a million bucks only buys a shack or a broom closet. Which areas of town offer homes in your projected price range? Once you narrow that down, check out the schools, crime rates, and shopping for the area.

Also check out traffic patterns for your commute. Don’t just assume Google maps shows the truth about rush hour. Do the drive at rush hour if you want the truth. What was an easy 30-minute drive between our latest home and my husband’s work during non-peak times was a grueling one-hour-plus commute during rush hour… each way.

6. What are the implications of buying with another person?

Buying a home with someone else has its perks, if you both have stable financial situations. It can allow you to buy more than you could get as an individual buyer. And lets you to share the financial burden.

But, a huge warning here…

Sit down and be completely frank about expectations on both sides. Proceed cautiously. Set the ground rules in writing to save major headaches and potential fights later, especially if you’re buying with someone you’re not married to. What happens if you decide to split up later? Or one of you becomes ill and dies? If one of you needs to move, will the other have to sell the house to cash out the first person? What if it’s a crappy market at that point? And on and on…

There are so many serious implications with this practice that you should consult an attorney to reduce your risks. Personally, I hate life and legal entanglements like this. Life is hard enough without “pretending” you’re married when you’re not, then buying property together. Too much nasty stuff can come from it. Proceed with fear and trepidation. Or don’t walk this path. 

7. Could you find a way to radically slash your expenses to put more money down?

Most people won’t be willing to do this, but what if you could find a way to reduce your expenses almost to zero for the next year or two, so you can proceed from a position of greater strength?

Buying Your First Home
Planning ahead for homebuying is a “must.”

A few years ago, I heard a story of a couple who traded a room above a woman’s garage in exchange for doing yard work for her. They in essence had free rent. Instead of, say, spending $12,000 a year on rent, they stashed it away toward their first home. They used similar strategies with the rest of their budget. These efforts gave them more money for down payment and closing costs – sooner than they would’ve otherwise. It expedited their home-buying journey.

These kinds of deals are out there. But you’ll have to hunt for them. Occasionally they may come knocking on your door, but don’t count on it. Anyone can do this – even you! Take the initiative, plan ahead, start a side hustle, get creative, pay down debt, reduce spending, and pretty soon you too will be ready to ask how to buy your first home and get your own first home.

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