Buying your first ever property, probably your future and dream home is a big step for anyone. Some people are hesitant to take this huge change in their lifestyle while some focuses on the small step-by-step details in achieving such goals. Most of the time, when people focuses on the bigger factors, they tend to not buy their first property, or even put up a down payment for it. But how can you tell if you’re already capable of achieving this once-in-a-lifetime chance of owning your home?

There are several factors that play a crucial role in assessing yourself but you only need two primary factors: financial and psychological factors. Buying a property really needs money and in order to maintain the lifestyle that you want, you need to be prepared financially. Aside from this, you need be prepared mentally in setting your expectations while living in that property. Let’s start assessing yourself if you’re already capable of buying your first home! Give yourself a point for every factor that you’re already doing! Let’s see who among of you can reach 8 out of 8! Good luck!

First and foremost, buying a property means a change of lifestyle. You must have a good savings habit already especially if you’re going to take out a mortgage. You already know how much you makes, how much to allocate on various expenses and financial obligations and how much to save as you build your other funds. Basically, you already know how to budget your own financial resources. This way, you’ll have a lesser risk of defaulting in your mortgage.

Generally, if you want to take out a loan, you can only allocate a maximum 35% of your monthly income for your monthly mortgage payments. This shows that you only have 65% left as your disposable income. You try to check if your current monthly expenses fit within the 65% of the income including savings. A great practice for starters is to allocate 35% of your monthly income towards savings for your down payment. This way, you can already practice living within the 65% limit. If you can do this, then you’re ready for the next qualification.

Next, if you already have a good savings habit, probably you already save ample amount of money for the upfront cost. These are the costs that you need to pay in order to buy that property. This includes the upfront down payment, loan application fees, processing fees, assessment fees and all other incidental costs that you may incur in purchasing your dream home.

The amount can vary depending on the price of the property and the charges that different institution charges you. A general rule of thumb is that you must already have at least 25% of the total contract price of the property plus an additional 10% of the property price to cover all processing and closing costs.

Third, you must have a stable source of income. Of course, if you wanted to have a loan, then you need to show the bank or any financing institutions that you’re capable of paying them on a monthly basis by showing them your proof of income. This can be your pay slip, your average monthly cash inflows in your bank statement within the last 12 months or even your income tax returns! Prove to them that you’re capable of paying them regularly on time. Because buying a property are a lifetime commitment and a longer time commitment for your loan payments.

Fourth qualification, you must be completely or almost free from your previous or existing bad debts. Why? Because if you want to take out a loan, then you must show the financing institution that you don’t have any delinquent or cancelled debts from your previous transactions. This can be your utility bills, credit card debts, subscription payments, business loan, personal loan, home equity, car loan and even an existing mortgage.

The only exception is those who can prove to the financing institution that they have sufficient amount of net cash inflow to cover the debt payments for additional loans. So, if you already have bad debts on your record, might as well settle those first before applying for a new property loan. You need to increase those credit scores!

Now that we’re done with your financial factors or qualifications, I hope you gained a total of 4 out of 8 points! That’s a great sign! You are indeed ready financially to buying your dream home. But wait, there’s more! Let’s see if you’re psychologically prepared for any changes in your lifestyle and way of living.

Buying your first home means if you’re ready and prepared to be rooted. This means that you’re now ready to settle in a location where you would spend most of your live with. Your property is not moving, unless it’s a some sort of wheeled-property. But generally, where your home sits is where you would also sit.

This means that you already have future plans of staying in that location, building your family if you would prefer it and you’re already seeing yourself living in that neighborhood, in that city for a long period of time. It can be the busy metro but it can also be the serene suburbs. You need to choose what lifestyle you want. Do you want to be on the go most of the time? Or do you want to settle and living in a moderate phase of life?

Next, you’ll never be a good home owner if you’ve never been a great renter. Most of the first time home buyers come from the rental or leasing spaces. These people might not have their own home but they are already considering buying one for themselves. Now, ask yourself, “am I a good tenant to my landlord?” and if the answer is yes, then congratulations, you’ll be a great homeowner!

Why? Because renting vs owning only differs in one factor: ownership. But the rest? It’s still the same. You would still pay monthly for your home, you pay for property taxes, you pay for insurance of your home, you pay for the utilities such as the water, electricity and internet connections. Everything is still the same, just that today, you’re the owner.

Third, are you a matured adult already? Because buying a home takes a lot of commitment. This is not something you would want now and not later on. Mortgage is a long-term commitment and in fact, it might be longer than your existing relationship! The bank won’t take immature acts as payment for your home. So get up there, work, grind and be a matured adult paying those bills and maintaining your home.

How would you know if you’re already a matured adult? If you’re a previous renter, before stepping out of the property you’ve been renting for years, take a look at your spaces, are the countertops clean? Are the items in the shelves and cabinets properly arranged? Are the cables properly organized? Look back and assess yourself. Are you good in maintaining your home?

If you previously live with your family, take a look at your room, does it look neat and nice? Or is it filled with nasty trash all over the place? Do you make your bed every morning or do you leave it as if you have a helper to clean this up for you? Assess yourself, and if you know how to maintain your space, give yourself a pat in the back and of course, a point!

Lastly, you’re ready to slow down. When we still live with our parents or even when we rent out a space near our workplace, we’re always ready to go. When we forgot eggs, we just go down the building, across the street and buy some eggs. Everything is convenient but when you live in the suburbs, it’s a completely different story. You must be prepared to slow things down.

Slowing down doesn’t just pertain to getting hitched. When you finally decide to sign a mortgage, you should also realize that it comes with a lot of sacrifices and adjustments to your lifestyles. Unless your career is on the upswing and your income is getting bigger every year, then good for you! You should be ready to cut down on your lifestyle and travel expenses in order to accommodate your mortgage payments.

Have you completed this whole article? Then good for you! How many points have you collected along the way? A perfect 8? 7? Whatever the number is, you must always take a step back and think and reflect for a moment. You need to assess yourself if you’re ready to take that leap of faith or to continue what you have. What I mentioned in this article are just some tips and strategies in assessing yourself. But every one of us are different and unique. You can also set up a decision matrix or criteria for your own assessment.

What matters most is that we are aware on what we’re doing. Purchasing your first property is going to be one of the most memorable experience in your life and be ready ‘cause it a heck of a ride. It’s definitely doable amidst the challenges in life, but you can make it less nerve-wrecking by being self-aware of your readiness and capabilities. Not all that shines are gold.