A Guide to
Home Buying

& Reasons to Avoid
the Traditional Path
Purchasing a home can be a big decision. There are a few things to consider when determining whether you are "ready" to buy.

Financial Stability

First, are you in a financially stable position? Do you pay your rent on time every month? What is your debt situation? Is your job relatively secure? Do you have some cash reserves in case something unexpected happens? (A 6-12 month rainy day fund is ideal, though out of reach for many. You may want to have three to six months' worth of expenses saved up at a minimum.)

Down Payment

Second, do you have money for a down payment? While traditionally 20% is expected for the down payment, this is not always necessary. There are options for putting less down (FHA loans, PMI, 2nd mortgage, etc.), so just because you don't have 20% doesn't mean you can't buy. That said, in many cases, you will indeed need to come up with 20% of the purchase price in cash - so make sure you know where that will come from.

Medium and Long Term Plans

Do you expect to live in the home for at least five years? For many areas, this is about the break-even point for the costs that go into the purchase - if you sold it before this, you might lose money. But this "five-year rule" varies based on how fast home values increase in your area and other factors. The NYT rent vs. buy calculator is a good place to start understanding how long-term of a "plan" your home purchase should be. In general, the longer you stay in a home, the more worthwhile the investment.

Credit Score

In the initial phases of thinking about buying a home, it's a good idea to get a free credit review through a service like Credit Karma or a formal report directly from one of the credit reporting agencies. The higher your credit score is, the more favor able the terms will be on a home loan. If your score is not where you want it to be, look into how you can improve it in the short and medium term to increase your purchase power.
- Self Service -

Earn 2% by doing it yourself!

Watch a demo of how it works!