Are You Ready for Homeownership?

Ready for Homeownership?

While homeownership can be a great tool for building wealth, it also includes expenses like taxes, insurance, utility payments and unexpected repairs. As you begin the homebuying process, make sure you are financially ready. As you read through this list, keep track of what you have done and what you still need to do to best prepare yourself for homeownership.


Do you have a working budget? A budget helps you track your expenses and spending. If you're not sure where your money goes, write down everything you buy in one week (or one month, if you're feeling ambitious), and add it up in categories. You may be surprised at how your "small" expenses become bigger budget items over time.

Qualifying for a mortgage is different than being able to afford it. This budget form can help you determine what you can actually afford by plugging in your current expenses.


Request a free credit report once every 12 months from each of the three nationwide credit reporting companies: Equifax, Experian and TransUnion. You can request all three reports at once, or space them out throughout the year through Credit reports are different from your credit score. They show your financial history, like bill payments, debt, and loans. They also show whether you've been sued, arrested, or filed for bankruptcy.

Check for discrepancies or incorrect information in your credit report because these may affect your ability to get a loan. You should verify that all the accounts listed on the credit report are yours and that you have not been a victim of identity theft. (If you think your identity has been stolen, the Federal Trade Commission can likely help.)

Your credit score, or FICO score, rates your credit risk. It helps lenders determine if they will lend to you and what interest rates to offer. A higher score increases your chance of getting loans, renting, or lowering your insurance rate. Your score is determined using five factors:

  • Payment history (whether or not you pay your bills on time)
  • Amounts owed (the number of credit accounts you have)
  • Length of credit history (how long you’ve been using credit)
  • New credit (how often you apply for and qualify for new credit)
  • Types of credit used (a mix of your types of debt).

You can check your FICO score at Beware of credit repair scams that promise to fix your credit for a fee. The only way to fix damaged credit is to pay your bills on time.


There are three basic types of debt:

  • Installment Debt – Money owed to a creditor who expects repayment over a fixed period and made in equal monthly amounts, e.g., a mortgage or car loan.
  • Revolving Debt – Money owed to a creditor who sets your monthly payments based on the current balance, e.g., credit cards. Interest accrues on the outstanding balance and can add up if you don't pay the balance in full each month.
  • Open Debt – With open debt, you accrue a balance and pay it in full when you get your bill, e.g., a cell phone. Monitoring your balance is important because there is no preset limit, which could have potentially damaging effects on your credit, if you don’t pay the monthly balance.

Credit Cards

Credit cards offer many conveniences to consumers. However, there are a few things you should be aware of when managing your credit card debt:

  • Even if you make your payments on time, the bank can raise your interest rate automatically if you are late on payments elsewhere. Called "universal default", this is often a standard clause in credit card agreements. There is no federal limit on the interest rate a credit card company can charge.
  • By making only minimum payments, it could take years to pay off credit card debt, which means you pay far more than the cost of the items or services originally purchased. Payment calculators can help you determine how long it would take to pay off balances.

Planning for the Future

Once you know how and where you spend your money, you can adjust your spending habits to plan for events in the future. When buying a home, consider other costs like maintenance and repairs.

When developing a long-term plan, know that maintenance can be costly and require immediate attention. If the hot water heater needs replacing, you would not want to delay the repair, risking additional damage. A new hot water heater costs approximately $250 to $500, but if you are unable to install it yourself, you could pay an additional $500 in labor costs. Other maintenance items could include roof or furnace repair/replacement, gutter cleaning/repair and more.

Building a financial safety net (i.e., emergency savings) is critical preparation for the unexpected. Also, consider the amount you’ll want to contribute to a long-term savings plan to achieve financial goals like funding a college plan or retiring comfortably.

As you begin your home search, ask yourself the following:

  • Do you have a steady, reliable source of income and a two-year employment history?
  • Have you established a credit history? Do you pay your bills on time?
  • Would you be able to manage a mortgage payment in addition to your current debts and expenses?

We hope that this list helps you prepare to make your dream of homeownership a reality. When you're ready to get started, contact an OHFA-approved lender!