Don’t make an offer on a property until you read this.
- Ramit Sethi is a well-known financial expert and founder of I Will Teach You to be Rich.
- Sethi has weighed in on how you can tell if you’re ready to buy a house.
- He believes you need a hefty down payment and a plan to live there for a decade.
Rami Sethi is an entrepreneur and finance expert who created the popular blog, I Will Teach You to be Rich. Sethi has provided ample financial advice about some of the most important choices people make when it comes to managing money. Unsurprisingly, he’s weighed in on when you should buy a home.
Sethi believes it’s crucial for people considering purchasing a property to ensure they are really ready to do so. As he wrote on his blog, “Buying a house has been sold as a major part of the American Dream, but for many people, it doesn’t make sense for financial or lifestyle reasons.”
You don’t want to make a home purchase if you’re one of the people who isn’t in a good position to buy. Fortunately, Sethi has provided some tips on determining if homeownership is the right choice for you.
Sethi believes you should ask yourself five key questions to determine if you’re ready to buy a house
In order to determine if you’re ready for homeownership, Sethi believes you should ask yourself these five questions:
- Will you remain in the property for a decade? Sethi believes it’s important to make sure you’ll be in your home for a long time before buying due to the high transaction costs and fees associated with a sale. If you’ll be staying put only for a short time, he believes you’ll “almost certainly lose money” and you’re better off renting and investing in an S&P 500 index fund with the money you’d otherwise use for your home down payment and mortgage cost.
- Can you keep housing costs below 28% of gross monthly income? Sethi warns you could become “overwhelmed with expenses” if your housing costs exceed 28% of gross income. Gross income is before taxes, and housing costs include your mortgage, property taxes, and insurance.
- Do you have 20% of your home’s value to put down? According to Sethi’s blog, you’re “not ready to …….