How do I know if I'm ready to buy my first home?

"Six to twelve months away"

An accountant once referred a family to me with this note:

These guys aren't ready yet, probably six to twelve months away, but they'd get something out of talking to you.

I treated them as if they were ready today. They were. They were much closer than anyone thought, including them.

That's common. People judge their readiness by one number, usually their savings. Then the real questions arrive all at once, on a Saturday, at an auction.

Readiness is more than a deposit

Being ready for the loan is not the same as being ready for the buying decision. A pre-approval says a lender is willing to lend. It doesn't say the home, the price and the timing work for your family.

Questions that show whether you're ready

• Do you know the most you should spend, not just the most you can borrow?
• Do you know every cost on top of the price, and do you have the cash for it?
• Do you know what your pre-approval covers, and what could still stop the loan?
• Have you agreed a walk-away price, and who will hold you to it?
• Would you still be comfortable if the rate went up, or one of you stopped work for a while?

If you can answer those, you may be closer than you think. If you can't, that's useful too. It tells you exactly what to work on.

Related questions

• How much should I spend on my first home?
• Should I bid over my limit at auction if family offers to cover it?
• Is paying LMI ever worth it?

This is general information, not personal advice. Rules change, so check what applies to you now.