5 Signs You Are Not Ready to Buy a Home (And What to Do About It)

By Josh Lewis, Certified Mortgage Consultant & Jeb Smith, Huntington Beach Realtor | The Educated Homebuyer Podcast

Everyone wants to own a home. The question is not whether homeownership is a good idea. At any given time, roughly 65 percent of American households choose to own their home, and for most middle and upper-income earners, that decision has been one of the most powerful wealth-building tools available. The real question is not if you should buy. It is when.

The honest answer, the one that serves you better than any clickbait headline, is that some people are not ready right now. Not because they will never be ready. But because there are real, specific, identifiable signs that point to a smarter path before signing a purchase agreement. Buying before you hit these checkpoints is one of the fastest ways to turn the most powerful financial asset in your life into a serious source of stress.

Below are five of the clearest signs you are not ready to buy a home yet, along with the practical steps to get there.

1. You Do Not Know Your Numbers

This is where almost every premature buying decision begins to unravel. Most people who call a lender and say "tell me how much I can afford" are skipping the most important step of the entire process. Before you talk to anyone about a mortgage, you need to know your own financial picture.

That means more than knowing your gross income. Two households both earning $115,000 a year can be in wildly different positions to buy a home depending on what their monthly obligations look like, what they have saved, and how they actually spend their money. Gross income is what lenders use to qualify you. Net income is what you actually live on. These two numbers can be dramatically different, especially in California where state taxes, 401(k) contributions, and cost of living all take significant bites out of a paycheck.

Here is the conversation that signals a buyer is truly ready: they have gone through two or three months of bank statements, identified where their money goes, and can say "my all-in payment would be $700 more per month than what I pay in rent, and I know I can handle that because I have been setting aside $1,500 a month." That is someone who has done the work.

The conversation that raises concerns is the one where the buyer just wants to know the ceiling. When someone takes their pre-approval maximum as their shopping budget without anchoring to a personal spending plan, they almost always end up house-poor. They check more boxes at a higher price point, the home looks right on paper, and then they close and realize there is nothing left over every month for repairs, savings, or the unexpected expenses that homeownership always brings.

You do not need sophisticated budgeting software. You need an honest, one-time look at where your money goes and how a new housing payment actually fits into that picture. Do this before you ever talk to a lender.

2. You Would Be Draining Every Dollar You Have

This one is especially relevant in high-cost markets like Orange County and Huntington Beach, California, where down payments and closing costs can easily add up to $30,000 to $60,000 or more on a starter home. The pressure to clear the bar is real. But clearing the bar with nothing left behind is not the same as being ready to buy.

FHA loans, VA loans, and conventional programs designed for first-time buyers do not require cash reserves at closing. The underwriter will approve the transaction as long as you can cover the down payment and closing costs. What the underwriter cannot account for is the reality that homeownership comes with costs that start the moment you close. Water heaters fail. Pipes leak. HVAC systems wear out. The first year of ownership is often the most expensive, and buyers who arrive at the closing table with nothing in reserve often find themselves reaching for credit cards when those moments hit.

The scenario that is most concerning is not the buyer who is a little stretched. It is the buyer who has never been able to save anything on their own, but has a family member who will provide the down payment as a gift. Buying a home is a milestone that reflects the ability to manage credit, maintain employment, sustain a relationship, and accumulate savings over time. If the only path to closing is relying entirely on someone else's money and you have no reserves of your own, the home purchase is getting ahead of the foundation it needs to stand on.

This does not mean you need to be wealthy before you buy. It means that having even a modest cushion, even $5,000 to $10,000 beyond what you need to close, is a meaningful indicator that you are operating from a position of stability rather than desperation.

3. Your Income and Career Are Not Stable

A mortgage is a 30-year commitment. The income and career that support it need to be on a predictable and upward trajectory before you take it on.

This does not mean you need a 20-year tenure at a single employer. What lenders and mortgage underwriters are evaluating is consistency, predictability, and trajectory. Someone who just completed a nursing program and landed their first full-time nursing job at $85,000 is in a strong position even if their W-2 history is limited. Nursing is in demand, the certification is in hand, and the income path is clear. The same is true for a journeyman welder who spent two years as an apprentice and is now earning $110,000 in the union. The context matters.

What is harder to work with is a pattern of bouncing between industries, unexplained gaps in employment, or income that spiked dramatically through a circumstance that may not continue. If a family member hired you into a well-paying job you are not sure you will stay in, building a 30-year financial commitment around that income is risky for you, not just for the lender.

Location stability is part of this equation as well. If you recently took a job in a new city and you are not certain it is where you plan to build your life, buying a home within the first year or two adds a layer of risk that is difficult to manage. Selling a home is expensive. Transaction costs, commissions, and potential market timing issues can turn a short-term homeownership stint into a financial setback. Renting for a year in a new area is almost always the smarter play. You learn the neighborhoods, you understand your commute, you get a feel for where you actually want to live. That knowledge is worth the temporary cost of renting.

This came up clearly with one buyer who relocated from Huntington Beach to rural Tennessee during the pandemic, drawn by dramatically lower payments and an appealing lifestyle vision. She was back within six weeks. The home is now a rental she manages from a distance, a situation she finds frustrating and expensive. The romantic idea of a new location can look very different once you are actually living it day to day.

4. Your Credit Score Needs Serious Work

Of all the signals that someone is not ready to buy a home, this one is the most straightforward to identify and the most actionable to address.

Here is the honest version of the credit score conversation that a lot of mortgage content online glosses over. Yes, FHA guidelines technically allow for a 580 credit score with 3.5 percent down. Yes, VA loans have no formal minimum credit score requirement. But those technical minimums are not the same as practical reality, and they are certainly not the same as buying under the best possible terms.

At a credit score below 640, it is very unlikely that an automated underwriting system will approve your loan. That pushes the file into manual underwriting territory, which means stricter debt-to-income requirements, compensating factor requirements, higher rates, and a considerably more difficult process from start to finish. The rate alone at those credit score levels can cost thousands of dollars more per year than the same loan taken out by a borrower with a 720 or 740 score.

The more important point is what a credit score actually represents. It is the single best predictor of how someone will handle a debt obligation in the future. A 680 credit score is not a perfect score, but it demonstrates that the borrower has gotten their obligations in order and can responsibly manage what they owe. A 580 score is a signal, regardless of circumstances, that there is still work to be done before taking on the largest debt most people will ever carry.

The good news is that credit improvement is one of the fastest things you can address. Depending on what is driving the low score, a motivated borrower can move from 580 to 680 in as little as three to six months. At 640, FHA and VA loans become accessible with automated approvals and competitive rates. At 680, conventional financing comes into play and the terms improve significantly. At 740 and above, you are accessing the very best pricing the market has to offer.

If your score is below 640 today, the most productive thing you can do before anything else is understand exactly why. Get your credit reports, identify the specific items pulling you down, and work with a lender who can walk you through a credit improvement plan. That conversation costs nothing and could save you tens of thousands of dollars over the life of your loan.

5. You Are Buying for the Wrong Reasons

Emotional decision-making around homeownership is incredibly common, and it is worth talking about plainly because it is one of the most reliable ways that otherwise qualified buyers end up in difficult situations.

People buy emotionally and justify logically. That is not a criticism. It is human nature, and it applies to almost every major purchase decision. But when the emotional driver is strong enough, it can cause buyers to overlook or rationalize their way past the very checkpoints that protect them. The baby is coming and needs a home. Your partner will feel more secure if you own. Your parents keep asking why you are still renting. Your friends just bought something and you feel behind.

None of these are reasons to buy a home before you are financially ready. Social media makes this harder. The highlight reel of homeownership looks extraordinary. The renovation reveals, the backyard gatherings, the holiday decor in a beautiful space. What does not make the highlight reel is the month when the roof needed repair and the savings account went to zero. Or the relationship that buying together under pressure did not improve but made much more complicated to exit.

A home is an amplifier. A strong financial foundation paired with stable relationships and clear long-term plans means a home purchase amplifies all of that in a positive direction. But when the foundation has cracks, adding a mortgage does not patch them. It magnifies them.

Buying right means buying when the pieces are actually in place, not when the pressure to buy has reached its peak.

A Few More Things Worth Considering

Trying to Time the Market

If you are waiting for prices to fall, interest rates to drop to a specific number, or some external condition to make the decision feel perfectly safe, you are probably not ready. Buyers who tried to time the market in 2019 by sitting out what they believed was an overpriced market have watched values rise roughly 60 percent in the years since. The perfect moment does not exist. The right moment is when your personal financial foundation is solid and you have a long-term plan for the property.

Relationship Uncertainty

Buying a home with someone, whether married or not, creates a shared financial and legal obligation that is difficult to unwind. An unstable or uncertain relationship does not become more stable because you added a mortgage to it. If there are serious questions about the long-term direction of a relationship, those questions deserve honest answers before a home purchase enters the picture. This applies to married couples as well, but it carries additional legal complexity for unmarried buyers who do not have the same legal framework for separation that marriage law provides.

Buying in an Area You Do Not Know Well

If you are new to a city or a neighborhood, renting for at least a year before buying is almost always the right call. The Southern California housing market has enormous variation across even short distances. The difference between neighborhoods in Orange County in terms of commute, schools, walkability, and long-term appreciation can be significant. Renting first gives you real, lived experience rather than an impression formed from a weekend visit or a social media feed.

Not Ready Now Does Not Mean Not Ready Ever

Everything covered here is a checkpoint, not a verdict. Credit improves. Savings grow. Careers stabilize. The goal of identifying these signs is not to discourage anyone from homeownership. Quite the opposite. The goal is to make sure that when you do buy, you are in a position to make it one of the best financial decisions of your life rather than one of the most stressful ones.

Most households who go on to become successful homeowners passed through some version of each of these checkpoints on the way there. The difference between buyers who thrive and buyers who struggle is usually not luck. It is preparation.

Know your numbers. Build your reserves. Stabilize your income and location. Fix your credit. And make the decision when the fundamentals say yes, not when the pressure says now.

That is what it means to buy right, borrow smart, and build wealth.