Should I Buy a House? How to Tell If You’re Ready

By the Mercury Team

Buying a house is one of the biggest decisions you’ll ever make. But are you ready to take the plunge? While you may have your eye on that charming cottage in a family-friendly neighborhood or a sprawling “forever” home in the suburbs, there’s a lot more than just curb appeal that goes into the homebuying process. It’s about financial stability, lifestyle choices, long-term commitment, and understanding the full scope of responsibilities that come with homeownership. Whether you’re a first-time homebuyer ready to commit or you’re looking to upgrade, you’ll want to consider the following long before you ever get that set of keys.

What to Know Before Buying a House

Before you begin house hunting or browsing online listings, it’s important to understand what goes into owning a home beyond just the sale price. Owning a home means more than just making a mortgage payment. You’ll need to maintain the property, budget for repairs, manage insurance and taxes — and plan for the unexpected. If the water heater breaks, the roof leaks, or the lawn needs care, those costs are yours to cover.

Misconceptions about Homebuying

A common myth is that buying is always cheaper than renting. But depending on where you live, renting may be more cost-effective in the short term, especially when factoring in maintenance, insurance, and property taxes. Another misconception is that you need a 20% down payment. While that’s ideal, many loans require less with added mortgage insurance.

That said, there are plenty of benefits to owning versus renting your place. You’ll build equity over time, won’t have to deal with landlords raising rent or ending your lease, and can customize and improve your living spaces without having to get permission to do so. Plus, you may get potential tax benefits from your mortgage interest deductions.

Financial Readiness: Can You Afford It?

The question isn’t just “Am I ready to buy a house?” but more specifically, “Can I afford to buy a house based on my current finances?” Here are a few key considerations when putting together your homebuying budget:

• Down payment and closing costs. You’ll generally need between 3 and 20% of the purchase price for a down payment, depending on the loan type. On top of that, closing costs, which may cover fees like appraisals, inspections, and lender charges, can add 2 to 5% of the home’s price.
• Credit score and debt-to-income ratio. Lenders will evaluate your credit score and debt-to-income (DTI) ratio to determine your mortgage eligibility. A credit score of 620 is often the minimum, but 740+ typically qualifies you for the best rates. Ideally, your DTI (monthly debt payments divided by gross income) should be under 36%.

• Emergency fund and ongoing maintenance. No one wants to save for a “rainy day,” but inevitably, your water heater will stop working, the garage door will get stuck, or the dishwasher will flood the kitchen floor. If buying a home will drain your savings, you may want to wait. You should have a three- to six-month emergency fund in place to cover job loss, home repairs, or health emergencies. Set aside at least 1% of your home’s value annually for maintenance costs.
• Pre-approval vs. pre-qualification. Getting pre-qualified gives a rough idea of your budget. But pre-approval involves a deeper financial review and gives sellers confidence you’re a serious buyer. You’ll need to get pre-approved before officially starting your homebuying journey.

Emotional and Lifestyle Readiness

Many first-time home buyer mistakes are emotional, not financial. Don’t rush into a purchase just because everyone else is doing it. Avoid falling in love with a house that stretches your budget or skipping inspections due to fear of missing out. Before you let yourself get taken in by that green expanse of lawn or that sunlit primary bedroom, make sure you’re actually ready to settle in one place. Buying makes sense if you plan to stay put for at least three to five years. Moving too soon after buying can result in financial loss, especially if the market drops or you haven’t built enough equity.

And finances aside, ask yourself if you’re emotionally ready to be responsible for everything, from handling those unexpected repairs and mowing the lawn every week to dealing with neighbors.

Homebuying Tips for First-Time Buyers

If you’ve done all your research, gotten your finances in order, and feel like you’re emotionally ready to find that perfect home, then you’ll want to get started with these homebuying tips:

• Work with a real estate agent. A qualified professional will help you through the entire process, from navigating listings, negotiating offers, and avoiding any mistakes. They can also connect you with inspectors, lenders, and repair people.
• Don’t skip inspections or contingencies. A thorough home inspection protects you from surprises once you’ve signed all the paperwork. Contingencies, like financing and appraisal clauses, let you back out of a deal under certain conditions without losing your deposit.
• Stay flexible during the search. You might not find your dream home right away. Be flexible about features like flooring or countertops; those can easily be changed later. Focus instead on location, structural integrity, and layout.
• Avoid decision fatigue. Touring multiple houses and dealing with paperwork can be exhausting. Take breaks, stick to your list of must-haves, and don’t feel pressured into buying something that has red flags or is over budget.

How a Home Bidding War Can Affect Your Decision

So you’ve put in an offer, but so have three other people. Pre-approval, a flexible closing date, and even a personal letter to the seller may help you stand out depending on the market. Waiving certain contingencies cautiously may also strengthen your offer, but always consult your agent first because that can be a dicey proposition.

It’s tempting to stretch your budget during a home bidding war, but be careful. Bidding wars can lead to inflated home values and future regret if you’re financially overextended. Instead, before making any offer, determine your maximum price and stick to it.

The Role of Home Insurance in Buying a House

Start researching homeowners insurance once your offer is accepted. Home insurance for first-time buyers — or any buyer — is required when taking out a mortgage. Lenders need assurance that their investment is protected from damage or disaster, so you’ll need to show proof of coverage before closing.

What kind of coverage do you need to buy a home? Standard policies typically cover fire, storm damage, theft, and liability. You’ll want to sit down and compare coverage limits, deductibles, and customer service ratings before choosing a provider. Shopping for home insurance early gives you time and flexibility to compare cheap home insurance and evaluate ways to save on home insurance, such as bundling policies, increasing your deductible, or shopping multiple providers.

Final Checklist: Are You Ready to Buy?

Ask yourself the following before moving forward:

• Do you have a stable income, good credit, and savings for a down payment and emergencies?
• Have you researched local home prices, trends, and interest rates?
• Are you ready for long-term responsibility and less flexibility to move?
• Does buying a home support your personal, career, and financial goals?

Still Not Sure? Talk to a Professional

It’s okay if you’re still unsure. Home buying involves a lot of big steps. A financial adviser can help you understand your mortgage options, and an insurance agent can walk you through what coverage you’ll need and what it will cost. Mercury Insurance offers valuable resources for first-time buyers, including tips on home protection, budgeting, and policy selection.

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