1. You’re willing to own the property for at least 5 years.
Buying a home is an investment, and it has transaction costs. Expect to pay about 5% of the purchase price to buy and about 10% to sell. If you don’t expect to own the home for 5 years, it’s not worth buying. The risk of loss to too great given the transaction costs you have to offset and potential market fluctuations. Notice how I said own the property, not live in the property. If you think you may only live in the property for a just a couple years but are open to renting your home—personally a big fan of this idea—then the buying option should still be on the table. This is how I got started acquiring rental property.
2. You can afford it.
While there are some great down payment programs that make it easier to get into a home, you should still have some money. I’m talking real money in the bank––at least $3,000 left over after you close on your house. Stuff will break, and you will have to fix it. You want your home to be a blessing, not a curse. You should also make a budget to determine what you can afford on a monthly basis, which is probably different than what the bank is telling you. Make sure to budget for monthly repairs and future replacement costs of things like the roof, siding, deck, etc.
3. You’re willing to learn how to fix stuff.
If you are unwilling to learn how to fix stuff, or don’t have handy relatives/friends willing to help, don’t buy a house. You don’t have to know stuff already, you just need to be willing to learn. I’m not trying to scare you, just sayin’—stuff breaks all the time. As long as you are willing to make that Friday evening Home Depot run or YouTube a video on how to unclog your shower drain, you’ll be fine. This is the one criteria where I’ll give you some wiggle room: if you are unwilling to learn how to fix stuff, buying a newer townhome or condo where at least exterior maintenance is taken care of may still make sense.
4. You like the home, area, and the lifestyle that comes with it.
The truth is that buying a home is a good financial decision if the above criteria are met. But if you don’t like the idea of living in a particular home/area or enjoy the lifestyle that comes with home ownership, then it may not be a good life decision. Maybe you enjoy being laser-focused on your career and are traveling all the time—home ownership might over-complicate your life. Or, maybe you want to live within walking distance of your job and there are no ownership options within your price range. Whatever the reason, if ownership doesn’t fit your vision of a great life, then you shouldn’t buy.
Hope this criteria is helpful as you consider buying a home!