7 signs you’re ready to buy your first home

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Twenty-somethings are known for being die-hard renters—or are we?

Many of us come home to our apartments each night and unwind to episodes of “House Hunters” or “Fixer Upper.” We gobble up DIY shows like they’re mac and cheese. We may not be homeowners yet, but we can’t seem to get enough HGTV.

It’s our way of vicariously living the American Dream. The shows make it look so easy: Tour a few houses, agonize a bit over the decision, and walk away with a new set of keys. Maybe, we start to wonder, the dream isn’t as far off as we thought.

Does your HGTV habit have you questioning whether homeownership might be a possibility for you? If so, this checklist can help you determine whether you’re ready to own a home. Here are seven signs that the answer might be “yes”:

1. You’re (mostly) debt-free.

Have you paid off most of your credit card debt? How about your student loans? Too much debt is a red flag for mortgage lenders and could be a sign that you’re not yet ready for homeownership. “Debt is a symptom of a greater problem: not enough money,” says Money Under 30. “If you are forced to use a credit card because there seems to always be more month than money, do not buy a house.” To figure out where you stand, take your gross income and divide it in half. Subtract your monthly payments that aren’t your current rent, utilities, and cell phone bills. What’s left is the amount most lenders will allow you to have for a monthly payment. If that number is close to the mortgage payment you had in mind you might be ready to take the leap.

2. Your credit rocks.

It’s an irrefutable fact: People with the highest credit scores get the lowest mortgage rates. For an FHA loan, you need at least a 620—pretty much the lowest score you can get away with. But you can do better. Pulling your score up into the high 700s can snag you a lower interest rate.

3. Your cash flow is on the plus side.

It’s a common myth that a mortgage payment costs the same as rent. With rents climbing as fast as they are, it’s easy to believe—but not really true. In addition to a mortgage payment, homeowners juggle expenses you’ve probably never thought of, like the median $33 a month spent on home maintenance. Do you have more money flowing in than what you need for bills and daily living? Make sure it’s enough to cover:

  • Mortgage payment
  • Property taxes
  • Homeowners insurance
  • HOA fees
  • Home maintenance
  • Water, sewer and garbage

4. You’ve got plenty of savings.

First off, you’ll need a down payment. You’ll get the best interest rate if you put down 20 percent, but an FHA loan can require as little as 3.5 percent. On a $200,000 home, that’s at least $7,000. But wiping out your savings to scrape together a down payment? Bad idea. Wait until you have some extra cushion for:

  • Home repairs—at least enough to handle the average home repair cost of $840
  • Closing costs, moving costs and other upfront expenses
  • Emergencies—at least three to six months’ worth of income

5. You plan to stick around.

Are you ready to give up your mobility for a while? Buying a home means putting down roots. When you add up the realtor fees, closing costs and interest, it takes years of mortgage payments to build up enough equity just to break even when you sell. Conventional wisdom has been that you’ll need to chill out for at least five years—although many experts now say it’s seven years—minimum.

6. You’ve got job security.

Let’s face it: Young professionals love to job-hop. Six in 10 millennials say they’re open to new job opportunities, and 21 percent have changed jobs in the past year. But many lenders expect you to keep the same job for at least two years before applying for a mortgage. Once you’ve got a mortgage to pay, leaving your job will get even harder. Find something you like enough to keep doing for the foreseeable future.

7. You’re at least a little handy.

Have you ever fixed a leaky pipe? Unclogged a drain? Changed an HVAC filter? When things go wrong in your home, there’s no landlord to call. Unless you can afford to have every problem fixed professionally, it’s on you to perform basic repairs. YouTube probably can tell you how—but you may have to wield the tools yourself.

If you think you might be ready for homeownership, your next step is to get pre-approved for a home loan. Many realtors require pre-approval before they’ll even show you a house. Once you know how much you can afford, you can start hunting for your epic first home.