No matter what’s happening in the real estate market, the right time for you to buy a house depends on you. The market will go up and down, and the value of a home will change over time as will interest rates on loans, and that’s always been the case. The right time to buy is when the buyer is ready both emotionally and financially.
Renting isn’t worth it
Depending on where the rental market is in the area you’re living in, buying may not be the most affordable option. Many people say that paying rent is like throwing money away. However, you also need to consider that when you make a mortgage payment, a percentage of that payment is on interest, and paying interest is also like throwing money away.
To get a good comparison on costs, you need to consider interest paid on a mortgage against the cost of rent. If the payment on a mortgage is higher than monthly rent, it’s possible that the amount of interest you pay on a mortgage will exceed the cost of renting in the same area. Paying interest on a mortgage is tax deductible where rent is not, so you should also keep in mind the money you’ll recoup in your tax return when deciding if buying is worth the money.
Your credit score is high
Buying a home with a good credit score is the best case scenario. You can get approved for a mortgage with poor credit, but it will likely mean you’ll only qualify for smaller loans, need to make a larger down payment, pay for mortgage insurance and it leaves you with fewer loan options. Paying bills on time, keeping credit account balances low, and not taking out credit you don’t need are good ways to keep your credit score on the up and up.
If your credit score isn’t where you’d like it to be, there are ways to boost it quickly. Check your reports to make sure there are no errors on it, look for outstanding debts that are actually paid off and accounts that may not be yours. Paying down balances on credit cards and spreading balances across multiple cards so none are close to maxed out can also help improve credit scores.
You have a down payment
When you’re financing a home, the benchmark for a down payment is 20% the cost of the house. However, the average down payment on a home in the U.S. is currently around 16%. it’s typical that buyers make down payments anywhere from zero to 20% down. Lenders may request a specific down payment, and if your credit is bad, that payment will likely be higher. If your credit is good, you may not need as large of a down payment, and the amount you finance will be higher.
Whether you’re making a large down payment or a small one, buyers need to be prepared to make a down payment to get the financing they’ll need. If that means saving money, do that before you start your home buying process.
You have reliable income and an emergency fund
Buying a home is a long-term investment. You’ll be making mortgage payments monthly and that’s all after you make your down payment. Buying a home requires reliable income and a plan to spend it on paying a mortgage and maintaining your home; it’s important to assess your finances and know your limitations so you won’t end up in foreclosure.
And emergency fund is essential when you own a home. Unexpected and potentially expensive repairs may come up at any time. Simply maintaining your home costs money too. It’s a good idea to invest at least 1% of the home’s value back into maintaining it each year. Homeowners should be financially prepared to handle emergencies, a three to six month cushion of living expenses will help you be a better prepared homeowner.
If you can afford to buy a home and you’re ready to do it, regardless of what the market is doing, it’s a good time to buy. Waiting for interest rates to drop or home prices to drop can get you caught up in a never-ending cycle of guesswork. Buying a home is a commitment; if you’re ready to make it, now’s the right time.