8 Steps to Determine if You are Ready to Buy Your First Home

By: Teri Treadway

With home prices cooling off and apartment rents heating up, is now the time to buy a home of your own? Here are some of the ways to know when it makes sense financially to purchase your first home.

The squeeze is on for renters. Apartment rents are expected to rise over 5% this year according to the National Association of Realtors. That's about double last year's increase and it's the highest jump since 2000. Until now, rents have seen slow growth over the last few years as the booming real estate market has lured renters into homeownership. All that is starting to change. Interest rates are rising and home price appreciation is slowing just a bit, so fewer buyers are looking for new homes. That gives landlords the upper hand to raise rents. Meanwhile the real estate market is starting to turn from the seller's favor toward the buyer's. So, if you're a renter who has been dreaming of homeownership, is now a good time to take the leap?

A cooling real estate market is definitely good news for buyers because it makes it easier to negotiate a deal, but it shouldn't be the main reason to purchase a home. Buying your first home is a personal decision that you should make independent of what is going on in the real estate market.

Time means nothing. You can't predict what will happen to home prices in your neighborhood in the new few months, let alone the next few years. But if you are looking to make the long-term commitment of homeownership, approach the decision like you would any business decision. You don't want to buy based on emotion, or because everyone else is doing it. This is one of the biggest financial moves a young person may ever make. You should make the investment because it makes sense for your finances. Buy when you are ready.

You are ready to buy when...You have a budget, and you know how to use it.You have the down payment funding requirements needed to buy a home.You have a reliable source of income.You have an emergency savings fund.You have your debts under control.Your credit report is in good shape.You can make a long term commitment.You are prepared to become your own landlord

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