NEW YORK (MainStreet) — If you feel like it might be the right time to finally buy your first home, your excitement is probably mixed with a bit of apprehension. After all, owning a home is a huge financial commitment, from paying that pricey down payment to keeping up with monthly mortgage bills. And without a landlord to call, you'll also be taking on a slew of new responsibilities to maintain the home and property (think raking leaves, shoveling snow and fixing leaky sinks). Of course, owning a home can offer many attractive benefits, including increased space and privacy and the ability to build wealth over time.
How can you determine whether you're ready to take on the responsibilities of homeownership? We asked a handful of real estate and financial experts to weigh in. Here are six key questions they suggest asking yourself now.
Can you cover upfront costs?
Hopefully you've been socking away your hard-earned cash over these past few years because you'll face some expensive upfront costs when purchasing a home. For starters, you should have enough money saved to cover a 20% down payment in order to secure the best possible interest rate on your mortgage and put yourself in the best negotiating position with your lender, says Bennie Waller, a professor of finance and real estate at Longwood University in Farmville, Va.
"Without 20% for a down payment, you will likely have to pay private mortgage insurance, which can be as much as—or more than—1% of the loan amount [per year]," Waller explains. "For example, on a $200,000 loan, private mortgage insurance could increase your payment by more than $150 per month. This will severely impact the mortgage amount in which you will qualify."