Can You (And Should You) Afford It?
Just because you can do something doesn’t mean you should do it. Your parents might consider buying a home a no-brainer. Your friends might want to live in a trendy neighborhood. But these are big decisions. It is important to make sure that you are coming to sound conclusions on your own. Ideally, your living situation should bring you joy, security and comfort — not stress and worry about paying your bills.
The Financial Planning Association (FPA) recommends asking yourself the following four questions before you decide to buy a home. These also can apply to renting your next home.
- Is your credit in good shape? Lenders and landlords will want to analyze your ability to pay your mortgage or lease.
- Do you have a steady job history? Most lenders and landlords will want to see evidence of steady employment for two years. You will be asked to explain gaps in your employment history.
- Can you really afford to make the monthly payments? Take into account all your monthly debts and the recommended guidelines for mortgages and rent payments.
- Have you saved for a down payment, closing costs, move-in costs or other fees?
If you answered “no” to any of the above questions, the FPA suggests you wait and give yourself more time to get financially ready to buy or rent your home.