Lisa bought her home at 27 years old, almost immediately after I purchased my house. She couldn’t let her baby brother be the only homeowner in the family. After all, owning a home are most people's dream, isn’t it? My sister proudly moved into her house and quickly filled it with more Ikea furniture than a Swedish hostel and the painted the rooms in all the latest colors, just like on some HGTV show.

Then the roof started leaking all of the sudden.

Followed by a shower handle.

And then the snow began to fall on her pristine driveway, making it impossible to get to work one morning.

And this was all in the first few weeks of owning a home.

Living across the country, there was little I could do to help. My parents did the best they could to assist, but over the next two years my sister spent more time trying to fix problems than actually enjoying her home. Meanwhile, in those two years I picked up a half-dozen rental homes and even a large apartment complex and found my true calling as a real estate investor. Clearly, owning real estate was working out great for me, yet to my sister it had become an enormous headache.

I’ll share with you later just what happened to my sister and her house. For now, however, I just wanted to tell this story to illustrate an point: Just because you can buy a house, doesn’t mean you should. Buying your first home can be a great step in climbing the mountain to financial security or it could be a cannonball into the river of debt and despair.

So how do you know when it’s right time to buy a house?

I’ll tell you the secret: It’s not about “when” but “who.” Who are you? What is your position in life? These are the questions that will determine when you should venture into home ownership. It’s not about an age you need to reach first. It’s about a person you need to become before buying a home. Although I bought my first home at 21, others might wait until 41. Others may rent for life, and that’s fine. There’s nothing wrong with renting.

Owning a home does have advantages for building wealth in life, but I advocate asking yourself these five questions before choosing to buy a home. If you can’t answer yes to each of these questions, put off buying a house.

1: Is Your Financial House In Order?

How much credit card debt do you have?

How about auto loans, student loans, or personal loans?

No, you don’t need to tell me. You can lie to me and to others all you want, but you cannot lie to yourself (or the bank) if you want to buy a home. I’m not saying that you can not have any debt in order to buy a home, but I believe debt is the symptom of a greater sickness. “But Brandon,” you say “I only have that debt because of (insert financial difficulty here).”

Exactly.

That debt is a symptom of a greater problem: not enough money. If you are force to use a credit card because there seems to always be more month than money, do not buy a house.

How about your credit? Are you rocking a 820 credit score or scraping by with a 620? Your credit score is the number a bank uses to determine how well you handle credit. If your credit score is terrible, it’s probably because you handle credit terribly. Yes, there are circumstances beyond your control that could affect your credit score (such as fraud or medical bills) but even so these issues need to be cleaned up before you begin shopping for a home.

2: Have You Saved Enough For A Down Payment?

Your down payment on your first home will most likely be the single largest investment you’ve ever made. I’m not just talking about the down payment you’ll need to finance the home, but also all the unforeseen costs that are associated with your acquisition.

As you probably know, today you can buy a home for as little as 5 percent down payment. On a $200,000 home that’s just $10,000. Many people look at that and say, “Well great! I happen to have saved just that much money!”

But don’t forget the closing costs, insurance, taxes, and money for repairs and furnishings to turn the house to a livable home. These costs will easily add thousands of dollars to your bottom line.

There’s not much worse than buying your dream home and not having a cent to fix it up to fulfill your dream. You may be stuck with plain white walls or an olive green bath tub for longer than you want. If, however, you can afford a down payment that allows room for breathing (and upgrades) after the purchase, you are on the right track to home ownership.

3: Can You Really Afford The Payment?

When it comes to your monthly mortgage payment, can you really own for the same amount as you can rent?

Most real estate brokers will enthusiastically tell you”yes!”

In truth, the amount you pay in rent probably would be similar to the amount you would pay in principle and interest on your mortgage loan. However, your principle and interest are not the only costs associated with owning. Don’t forget about:

Property taxes

Insurance

Heating

Condo fees

City assessments

Water, sewer and/or garbage

Other utilities your landlord may cover

These charges will  add hundreds to your monthly payment. On one of my duplexes, my tax and insurance payment is more than double the mortgage principle and interest!

Be cautious about simply using an online mortgage calculator to decide how much it would cost to own a home. The mortgage payment alone is only one piece of the puzzle. You must determine a reasonable amount that you can afford before you shop for your home. 

Only you know your personal budget and what you can afford, but I recommend never taking a monthly payment that is more than 25 percent of your take-home pay…and that includes your taxes and insurance. Most lenders will allow you to stretch yourself significantly thinner than that, but don’t fall for their temptation.