Real Estate Investing

There seems to be a common social stigma attached to renters, one of financial instability and ignorance. This may be true for some, but certainly not all renters. The simple fact remains that some people are simply not at the right point in their lives to buy a house. The right time differs for everyone, as it can certainly be affected by personal matters. However, there are some key signs to watch for that signal it might be the right time to make the leap into homeownership.

Your mortgage payment would be close to your current monthly rent. If you are managing to get by with a fairly hefty rent payment, you could have a comparable home for the same amount or even less per month. This is especially true when it’s a buyer’s market or that house you’ve had your eye on is still available after several months. Seller desperation works to your advantage.

Your debt is getting smaller. When you are paying off debt, your credit is improving. This helps you secure a loan with a better interest rate. Plus, the last thing anyone wants is to be knee-deep in debt when trying to meet all the unexpected financial obligations of moving and settling into a new home.

Your income is going up. Pay increases, promotions, or more sales accounts and bonuses are always a good sign that a major life change like buying a house is within reach. However, ensure that you are putting the sudden increase in “disposable income” to good use, which leads us to our next point.

Your spending habits are coming under control. Financial discipline is a sure sign of maturity and readiness to take on the responsibility of homeownership. Far too many people buy a house before they’re ready. They lack financial discipline to manage the balancing act of home, living and other expenses. They may begin using their home mortgage as an ATM machine, taking out home equity loans. Or else they may consolidate all their revolving credit loans, like credit cards, into the home loan. None of this addresses the behavior of undisciplined spending. Financial discipline is a must - that means the resolve to make a plan for your money and the determination to see that plan to completion.

You have saved, saved and saved some more. This is another area where far too many people buy before they’re ready. Their home’s maintenance needs fall by the wayside as the money must go to other areas. Eventually, their home may be in such disrepair that their home equity is nil. You must save enough money to handle the necessary upkeep. Then there are closing costs, and a significant downpayment of 20 percent or more will help you pay off your house faster, increase your home equity, and help you escape private mortgage insurance.

Buying a house is a huge commitment. Before proceeding, consider CNN Money’s “Four Questions Homebuyers Should Ask” and MSN’s “Three Worst Reasons to Buy a Home.” Run the numbers honestly and even with an exaggerated financial cushion that will provide for unexpected “uh-ohs”. Follow your gut instinct and decide whether this is the right step for you before you begin touring homes, lest your opinion be swayed by emotion.