Buying your own home is one of the biggest financial steps you can take. Owning a home in America is almost a rite of passage; it’s considered one of the signs of being an independent adult. Your reasons for wanting to purchase a home can vary. Maybe you’re looking for a bigger place to raise a family; maybe you don’t like any of the apartments near your work. Whatever your reasoning, when you’re ready to buy a home there are a few key things to consider before putting in an offer.

Size

Size does matter. It can be tempting to go for the largest home that fits within your budget, but you should carefully consider your future and present needs before aiming for a two story, 6-bedroom home. Think about the areas that you currently use in your living situation – do you spend most of your time on the couch? A larger living room might be more important to you than a master suite. If you’ve always dreamed of having a music room all to yourself, check out places that have more bedrooms. It’s important to consider the future, but if you already have a guest bedroom that you never use, getting a larger home might not be the right move.

Down Payments

There are loan assistance, there’s grants, there’s borrowing from your family… But there’s nothing like a sizable down payment. You might find during your housing search that the old baseline of 10% might not cut it anymore. A sizable down payment (around 20%) means that you hand less money to the bank in the form of interest over the coming years. While the upfront cost might take a good chunk out of your bank account, it will end up saving you money over the years.

Monthly Cost

Factoring monthly payments into your home search is crucial. It might be tempting to take the shorter mortgage length to avoid paying more in interest further down the line, but if you’re spending more than about a third of your take-home income on your housing, you’re spending too much. If you’re not able to find a home that costs less than 40% of your monthly income, you’re looking at homes that are out of your price range.

Emergency Fund

We talked about having a sizable down payment and a reasonable monthly payment, but what do you have as a backup fund? Homeowners unfortunately deal with all kinds of unexpected costs, from needing new appliances to absolutely needing to repaint the salmon-colored walls. If you don’t walk into your home with a decent chunk of change as ‘house money’, you’re asking for a bad time. Take a look at what you’ve got in your back pocket before making a sizable investment.

Student Loan Debt

Young homebuyers, beware. Or rather, be aware. Student loan debt plagues many young college graduates, and unfortunately it does follow you into the home buying process. This is by no means a deal breaker, but consider it before applying for a hefty loan. Your bank will factor in your student loan debt to your debt to income ratio, affecting your chances of acquiring the loan terms that you’re after.

Location

It’s become a running joke in realtor land, but ‘location, location, location’ really is the name of a game when you’re buying a home. You can have your eye on a gorgeous neighborhood, but if it’s 45 minutes away from your work it might not be the one you want to spend 30 years in. Think of your future before purchasing a home – do you want your kids to go to school in the neighborhood? Are you going to be happy with the available entertainment options nearby? Location is the number one thing you need to think about when you start the home buying process.