8 Signs You’re Ready to Buy Your First Home

Is now the time to buy? Are you financially able to purchase your first home? You should make your decision independent of timing the market. You should buy your first home because it makes sense for you. You buy when you’re ready. How do you know when your finances are ready?


This list is a checklist of eight things first-time home buyers should have squared away before they consider a purchase.

NUMBERS 1 & 2 are the ability to meet the two types of home owner costs:

#1 The ongoing costs – You need to have a budget – and know how to use it. 

There are expenses other than the mortgage. You need household budget right now, start one. Start with your mortgage, then factor in extra costs: higher utility bills, homeowner’s insurance, property taxes, homeowners association fees, and maintenance and upkeep costs.  If you simply cannot afford the increased expenses that come with a house, it’s never a good time to buy – no matter what’s happening in the Las Cruces real estate market.

#2: You have savings toward a down payment and the other up-front costs that go along with buying a home.

Upfront cost include not only the down payment plus you need to factor in closing costs, property taxes, initial repairs, moving expenses and decorating costs.


No. 3: You have a reliable source of income

Buying a home is a long-term financial commitment, so you’ll need consistent cash flow to cover those monthly payments. If you are in school, have a less-than-reliable job, or plan to start a family, you need to take a good look at your future cash-flow abilities. Will you be able to make your mortgage payment six months or 6-years from now? You may be able to afford the house when you are 2-wage earners. But there are many reasons that one wage earner is no longer working. Be aware – Be sure.

No. 4: You have an emergency savings fund

If you have enough cash on hand to cover three to six months of your living expenses just in case something disrupts your steady income. If you do, you are unlikely to be unhappy about a home purchase.

No. 5: You have your debts under control

Getting a mortgage and being able to pay all the ongoing costs of homeownership as in number #1.  Your debt-to-income ratio is very important. Generally speaking, banks want to be sure that your monthly housing costs – including principal, interest, taxes and insurance – will consume no more than 28-33% of your monthly gross income; and that your total debt payments, including your mortgage, credit cards, student loans and auto loans, will remain below 38% of your total pay. In order to be sure you can afford to be a homeowner, you should be sure you can make payment that will actually pay off  your outstanding debts.  You also need to be sure you can live a satisfying life while avoiding taking on any substantial  new debt until old debts are paid off. If you don’t have your debts under control you will have trouble meeting the costs of homeownership.

No. 6: Your credit report is in good shape

You will get a lower interest rate on your mortgage, and a lower monthly payment if you have a good credit history. You should check your credit history and then keep up with your credit history to make sure there are no errors. Even if there are late payments or other  defects on your credit report, there are many ways you can boost your credit report and  score.

No. 7: You can make a long-term commitment Are you ready to stay put for at least three to five years?  The reason we ask is because in order to recoup your buying and selling costs it will take that long for appreciation and equity build up to the breakeven point. If you sell before then, you may lose money on the deal.

The other reason is that one of the biggest benefits of homeownership is the creation of wealth through appreciation and equity build up. Another benefit that comes with longevity is the tax free profit that you get when you sell.

No. 8: You are prepared to become your own landlord

Even if you can afford homeownership, make sure you’re ready to live the lifestyle. Owning a place comes with a fair share of new responsibilities, headaches and costs, if it’s broke, you fix it -responsible for upkeep, maintain the property? How about the money for all those little extras, such as buying your own lawn mower and hiring the occasional plumber? Make sure you know what you’re getting into.