Key Takeaways: If you have a stable income, manageable debt, savings for a down payment or emergency, and plan to live in your home for at least five years, you may be ready to buy.
Wondering if you’re really ready to buy a home? This is one of your biggest financial decisions, and the answer doesn’t depend on savings alone. Whether you’re thinking of buying your first home in Austin, Texas, or settling into a home in Seattle, Washington, this Home Buyer Readiness Check breaks down eight signs that indicate whether now is the right time to buy a home, and provides a simple checklist to see where you stand.
Sign 1: You have enough savings to pay the bills.
Key takeaway: If you save at least 3% on a conventional or FHA loan and have an extra cushion for closing costs and emergencies, you’ve cleared one of the biggest hurdles to homeownership.
Saving for a down payment is one of the most obvious signs that you’re ready to buy a home. Most buyers think they need a 20% down payment, but the minimum down payment on a home varies depending on the type of loan and eligibility.
Conventional loans: As little as 3% down if you have good credit. FHA Loans: As low as 3.5% down, perfect for first-time buyers. VA or USDA Loans: 0% down option for eligible borrowers.
A larger down payment will lower your monthly costs and allow you to qualify for a better rate. If you put less than 20% down on a conventional loan, you’ll likely pay private mortgage insurance (PMI) every month until your loan balance is less than 80% of the home’s value.
Quick tip: The more you invest, the lower your monthly payments will be, and once you reach 20% you can avoid PMI altogether.
Example: How down payment size affects monthly payments
Home Price Down Payment % Loan Amount Estimated Monthly Payments* Is PMI required? $400,000 3% ($12,000) $388,000 ≈ $2,680 Yes $400,000 10% ($40,000) $360,000 ≈ $2,475 Yes $400,000 20% ($80,000) $320,000 ≈ $2,200 No
Estimates assume 6.5% interest rate, 30-year fixed mortgage, property taxes, and insurance.
Sign 2: You have an emergency fund and budget for start-up costs.
Bottom line: Once you’ve saved up for a down payment and have money to cover closing costs and emergencies, you’re on solid financial footing and ready to take the next step toward homeownership.
Being financially ready to buy a home means planning for more than just the down payment. Once you’ve decided on a home, you’ll need to have enough savings to cover closing costs, moving costs, and a healthy emergency fund for homeowners.
Most buyers make a down payment of approximately 6% to 9% of the purchase price, including down payment and fees.
What to include in your home purchase budget
Use this simple checklist to make sure you have all major expenses planned for before closing.
Budget Item Typical Range Why It Matters Down payment 3% to 20% of purchase price Lower loan amount and potentially lower PMI. Closing Costs 2% to 5% of purchase price Includes loan fees, appraisal, title insurance, and taxes. Moving-in costs vary. Includes movers, utility setup, and immediate repair costs. Emergency savings 3-6 months worth of expenses to cover repairs, income gaps, and other unexpected expenses.
Quick tip: Build up an emergency fund before you buy. This allows you to deal with leaky roofs, appliance repairs, and income disparities without relying on credit cards.
Sign 3: Your credit score and debt are ready for a mortgage
Bottom line: If your credit and debt levels meet these benchmarks, you can qualify for a loan and are in a good position to manage your mortgage with confidence.
A high credit score and low debt show lenders that you are financially ready to buy a home. Most conventional loans require a minimum credit score of 620, but FHA loans allow qualified buyers scores of 580 or higher with a 3.5% down payment, or scores of 500 to 579 with a 10% down payment. Meeting these criteria can help you qualify for a home loan and secure a better interest rate.
Equally important is your debt-to-income ratio (DTI), which is the percentage of your income that goes toward debt each month. Typically, lenders prefer a DTI below 43%, but having a DTI closer to 35% or less gives you more flexibility and long-term comfort. You can use the DTI calculator to measure your ratios and see where you stand.
Quick tip: Paying off revolving debt, such as credit cards, before applying will improve your score, lower your DTI, and improve your odds of approval.
Sign 4: Income is stable and documented.
Bottom line: Having reliable, well-documented income, whether it’s a salary or self-employment, is one of the clearest signs that you’re financially ready to buy a home.
Lenders look for stable, verifiable income before approving a mortgage. Providing proof of job stability and income can help prove that you can be paid consistently over time.
Most mortgage programs require at least two years of continuous employment in the same field, or two years of documented business income for self-employed buyers. To verify your income, you typically need pay stubs, W-2s, and tax returns.
If your work history includes recent job changes within the same industry, this is usually acceptable as long as your income level is stable or increasing.
Quick tip: The more organized your income documentation is, the faster the approval process will be and the stronger your application will look to the insurance company.
Sign 5: You’re budgeting more than your mortgage.
Having enough in your budget to cover taxes, insurance, utilities, and maintenance over your mortgage will help you cover the real costs of owning a home, and you’ll be less likely to face financial strain once you move in.
Buying a home is more than just paying a mortgage. It’s about managing all the recurring costs that come with ownership. Before you buy, make sure your monthly home expenses include not only principal and interest, but also property taxes, utilities, insurance, and long-term home maintenance costs.
Quick Tip: Budget by adding 1% of your home’s price to maintenance each year. A $400,000 home would have about $4,000 annually set aside for repairs and maintenance.
Typical monthly housing costs
Costs Covered General Range Mortgage Principal + Loan Interest Depending on loan size and interest rate Property taxes City or county real estate taxes 1-2% of annual home value Homeowner’s insurance Damage or loss protection $100-200 per month HOA costs Community or condo maintenance $100-400 per month (varies) Utilities Electric, gas, water, trash, internet 200 per month ~$400 Maintenance and Repairs Routine maintenance, systems, and appliances cost approximately 1% of the annual home value.
These numbers are general estimates for educational purposes only. Actual costs will vary depending on location, property type, loan terms, and use. Always check lender disclosures, insurance quotes, and local tax assessments for personal numbers.
Sign 6: You understand the market and mortgage landscape.
Knowing what’s happening in the housing market can help you decide if now is the right time to buy a home. Looking at current mortgage rates and local buyer-seller market trends can help you understand what competition you’ll face and what you can afford.
Even small changes in interest rates can make a big difference in your monthly payments and long-term costs. As interest rates rise, affordability decreases, reducing the amount of housing you can buy with the same budget.
Example: How mortgage interest rates affect monthly payments
Home Price Loan Amount Interest Estimated Monthly Payment* $400,000 $380,000 5.5% ≈ $2,160 $400,000 $380,000 6.5% ≈ $2,400 $400,000 $380,000 7.5% ≈ $2,660
The calculation assumes a 30-year fixed-rate mortgage that includes only principal and interest.
Timing is also important. In a buyer’s market, there may be more room to negotiate price and closing costs. In a seller’s market, you need to act quickly and make the best offer.
Pre-approval insights
Getting pre-approved before you shop shows sellers you’re serious and gives you a clear idea of your buying power. It also locks in your interest rate for a short period of time, which is a big advantage if you expect interest rates to rise soon.
Quick tip: Instead of trying to “time” the market, focus on when your finances, job security, and long-term plans align. Buying at the right time is more about continued affordability than the perfect rate.
Sign 7: Your lifestyle and long-term goals are aligned with homeownership.
Buying a home isn’t just a financial milestone, it’s also a lifestyle change. Before trading rental for ownership, consider how your work mobility, family planning, and long-term goals fit with the realities of maintaining real estate. If you plan to settle in a specific area or want more control over your space, homeownership offers stability, freedom, and stronger community ties.
If you still need flexibility in your career or lifestyle, it may be wiser to rent until you get settled.
Sign 8: You have a plan to maintain the status quo and build equity.
If you plan on living in your home for several years, you have the right idea about ownership. Many real estate professionals often refer to the “5-year rule of homeownership.” Once you factor in closing fees, property taxes, and maintenance, it typically takes about five years to break even on the purchase cost. By staying longer, you can build home equity through mortgage payments and potential appreciation, giving you a greater financial return when you eventually sell.
Are you ready to buy a home? A simple preparation checklist
You have a down payment and emergency savings You have managed your debt and have strong credit You have a stable job and income You have budgeted for taxes, insurance, and maintenance You understand current mortgage rates and market trends You have checked your credit report and corrected any errors You have a mortgage pre-approval and you know your price range Your lifestyle and long-term goals align with homeownership You plan to stay for at least five years Be prepared for repairs and ongoing maintenance Have researched neighborhoods and compared commuting distances Considered future costs such as schools and amenities, property taxes, insurance changes, and renovations
Self-assessment: Are you ready to buy a home?
Green: Matches 8 to 12 signs → Ready to purchase
Yellow: 4-7 signs → almost achieved, strengthen finances and plans
Red: 0-3 signs → Focus on savings, credit, and long-term stability before buying
Ready-to-purchase FAQs
1. How do I know if I’m financially ready to buy a home?
If you have a steady income, manageable debt, solid credit, and savings for your down payment and closing costs, you’re financially ready.
2. Should I wait until mortgage rates drop?
Only if the price goes up and has a big impact on your budget. Otherwise, buy when your finances and long-term plans align.
3. Can I buy a home using debt or student loans?
Yes, you can buy a home with student loans, as long as your debt-to-income ratio is within your lender’s limits and you can comfortably make the monthly payments.
4. What if there is no 20% down?
You can purchase with a small down payment. While many conventional loans start at 3%, FHA loans can cost as little as 3.5%.
