Search for Savings & Loans
Should I Buy A House? 5 Signs That You Are Ready
Should I Buy A House? 5 Signs That You Are Ready
See The Best Loans Available in Kenya Today
Money Management

Should I Buy A House? 5 Signs That You Are Ready

Money254
Eddy Mwanza
June 22, 2022

Renting a place to live allows you to move whenever you want, with none of the responsibilities that come with owning a home. Renting provides a lot of flexibility. When you rent a home, you are typically not responsible for large repair costs if something goes wrong.

However, most people ultimately want to live in their own home at some point. Purchasing a home is both exciting and terrifying. 

It can also come with a lot of stress, uncertainty, and questions; Do I have enough for a downpayment? What is the real cost of buying a house? Do I qualify for a loan? And the list goes on. 

They are questions that need to be answered before taking the leap and jumping to the homeowners side of the pond.

Housing Market in Kenya

Affordability is a big issue in the Kenyan housing market which is the single biggest barrier to homeownership . As a result, only about 20% of Kenyans living in urban areas own their homes.

According to Saif Properties - a real estate firm based in Kenya, a house in the Kenyan capital now costs 3.1% more on average, up from 0.20% last year. 

This is the fastest growth rate since 2018, when it was 8.5%, reflecting the property market’s recovery from the Covid-19 economic hardships.

Before making a decision to purchase a house, you need to learn as much as you can about the home-buying process. This will help you feel more confident about the investment you're about to make. 

But, before all this, you still need to look inwards and determine whether or not you are actually ready to buy a house.

Putting in the work and determining how much you can afford are the first steps towards becoming a homeowner.

So, let’s look at signs that could mean that you are ready to buy a house of your own.

Should you stop renting and buy a house? Signs that you’re ready

1. You can afford a down-payment

One of the best places to start is by looking at how much money you have saved towards home ownership and whether it is enough for a downpayment.

First-time buyers don’t have money from a previous home sale to help fund a downpayment. It is one of the primary reasons why the downpayment is one of the biggest barriers to homeownership.

Most people believe that they need a 20% down payment to buy a house, but it is possible to purchase even a brand-new house with much less down payment. 

The percentage highly depends on the property, your seller, and your choice in terms of financing. 

The financing option you can choose is determined your eligibility, how much cash you have, the value of the property, whether you are a landowner, legal fees, interest rates, and other costs.

2. Your debt is manageable

One of the things lenders look at when screening mortgage applicants is their debt-to-income ratio, or DTI. The higher your DTI ratio, the more risk you pose to a lender. 

Keeping credit card balances low and debt under control is beneficial in many ways down the line.

Read Also: Credit Cards in Kenya: Dos and Don’ts (How to Use Credit Cards Responsibly)

You don't have to be debt-free to buy a house, but having too much debt can make getting a home loan more difficult. 

More debt can also increase the cost of your loan because you are less likely to get the best interest rates.

Generally, people who have a track record of managing their debts are more likely to receive better terms on a home loan.

3. Rising rent

Rent increases make it more difficult to budget for monthly housing costs and save for other financial goals.

When paying rent feels like a bad investment and you want to save money for the future, it may be time to consider becoming a homeowner.

If your rent has risen significantly but you still feel trapped in your rental situation, the scales may be tipping in your favor.

According to recent trends, the gradual rise in mortgage rates seen in 2021, combined with a growing appetite among millennials eager to own a home, could result in a surge in housing sales in 2022, with rental prices also expected to rise.

If your rent is going to continue to rise in the foreseeable future and you have a stable income enough to qualify for home financing, home ownership may be a worthy consideration. 

4. Stable and predictable income

This is pretty straightforward when it comes to transitioning into a homeowner and looking for any form of financing in the process.

This may seem obvious, but determining how secure your income is can be deceptively difficult, especially given the economic impact of the pandemic.

You should not only be confident that your income will be secure for at least the next few years, but you should also be able to demonstrate a track record of stable employment in the past. 

When it comes to lenders, your history is everything. It tells them you have the money to finance your mortgage, if this is the option you decide to take.

Having a stable and predictable income for the long term also gives you peace of mind in that you know you can handle the monthly payment obligations or any unforeseen expenses on the property.

5. You've considered and can handle all cost of homeownership

This ties in with the previous point but expounds more into some of the less known costs associated with homeownership.

When a pipe bursts or the drainage pipes get clogged up in a rented unit, you don't have to worry about paying for it because the landlord is responsible. The same applies when it comes to property taxes, routine maintenance and homeowners insurance and so on.

However, once you switch sides and become a homeowner, you then need to get up to date with all the above and any other costs that may arise. When you own, all those costs are your responsibility.

Most experts recommend having enough cash to live on for three to six months in a savings account — and homeowners may want more.

According to Realtor.com, a good rule of thumb to follow when budgeting for home repairs is to set aside between 1% to 4% of the home's value, with a higher percentage set aside for older homes.

WRAPPING UP

As for financing options when it comes to buying a house in Kenya, there are quite a few, it all depends on preference and one’s financial status.

They include:  Mortgages, crowdfunding, loans, off-plan buying and savings/cash.

If you can answer “yes” to each of these factors or pointers raised in the article, then it may be time to move on to the next step of becoming a homeowner. 

Eddy Mwanza is Creative Consultant living and working in Nairobi, Kenya. His areas of focus are Content Creation, Creative Writing, Research and Photography. When he is not writing in his favorite coffee shop, Eddy spends most of his time reading, cooking, and traveling. He is also a sports fanatic. Connect with Eddy on LinkedIn.

Learn more about Personal Loans available in Kenya on Money254

Money 254 is a new platform focused on helping you make more out of the money you have. We've created a simple, fast and secure way to find and compare financial products that best match your needs. All of the information shown is from products available at established financial institutions that our team of experts has tirelessly collected.

Instantly search loan products from established providers in Kenya and compare on the terms that matter most to you.
Money254
Find the best Personal Loans for me

Stay up to date with your money - sign up for our newsletter today.

Get updates from the Money254 team on financial news and new Money254 features.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.