Ask yourself 5 questions before buying a home

Flickr/Sander van Dijk

Buying a home is a major financial decision. The National Association of Realtors reported that in November 2015, the median sales price of existing homes hit $220,300, or 6.3% higher than in the same month one year earlier.

As housing prices continue to climb, you need to make sure you're ready to make such a major investment. Here are five questions to ask to make sure that you are financially prepared for owning a home.

1. How much money do you spend and earn each month?

Real estate professionals say that your total monthly housing expenses, including your estimated new mortgage payment, should never equal more than 28% of your gross monthly income. To know if you can afford your new home's mortgage payment, you'll have to first list what you're already spending each month on such items as car loans, student loans, groceries, and entertainment. (See also: 4 Easy Ways to Start Saving for a Down Payment on a Home)

"Do I really know my current income and all expenses?" asked Glenn Phillips, chief executive officer with Pelham, Alabama's Lake Homes Realty. "If you know this for each month, you'll have a realistic understanding of how much money is available for both the purchase and monthly expenses of owning a home."

Those monthly expenses are important, and can add up. And Phillips reminds homeowners that they'll need to budget money each month for additional expenses such as homeowners insurance, water, sewer, garbage pick-up, and of course, home maintenance.

Getty Images / Jerry Cleveland

2. How handy are you?

If you're handy enough to handle minor — or some major — home repairs and renovations on your own, you might be able to land a home in a desirable neighborhood for a cheaper price. Homes that need updates and renovations usually sell for less, which can be a positive for the handy homebuyer with a limited budget.

But be careful: Home renovations might cost more than you think. If you're not able to do at least some of these renovations on your own, you might end up paying far more to update your home than you planned.

"Should I buy a home that needs no remodeling and is ready to move in at a higher price, rather than buying the same size home — but one that needs updating at perhaps a lower price?" asked John Bodrozic, co-founder of digital home management site HomeZada. "If I buy a home that needs some remodeling, how many projects are desired, and what is a realistic budget and time frame to get these projects done?" 

3. Can you afford the monthly maintenance?

Having enough money to cover your mortgage, utility bills, property taxes, and homeowners insurance is one thing, but do you have enough dollars to cover the monthly upkeep involved with owning a home?

A lot can go wrong with a home — even a new one. Your water heater might burst. Your roof might start leaking. Even smaller projects like maintaining your yard and landscaping can drain your dollars. It's important that new homeowners have enough financial slush in their accounts to handle the monthly cost of keeping a home running, said Melanie McShane, a real estate broker with Arcadia, California's BrokerInTrust Real Estate.

"Buying a home is just the beginning," McShane said. "Once it is yours, you need to maintain and improve it. Replacing a roof or an AC unit are costly fixes. It is imperative that people have a small savings for the upkeep of the home."

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