Is now a good time to buy a home? Mortgage rates climbed steadily throughout 2022, eventually reaching heights not seen in many years. Recently, rates have come down from their highs, but they still remain elevated.
While the state of the market will likely play a role in whether you decide to buy, it shouldn’t be the only factor driving your decision. Don’t overlook your own wants and needs, as well as your life situation and your overall financial fitness.
Following are some signs that might indicate now is a good time for you to buy.
You plan to remain in your home for a while
Buying and selling homes can be expensive. Market conditions can also change fast and unexpectedly, making it either easier or more difficult to unload your home when the time comes to sell.
In other words, the housing market is fraught with uncertainty. While you cannot eliminate this uncertainty, you might avoid having to deal with it if you simply buy a home and stay for many years.
Staying put means you can wait out any short-term fluctuations in the market and hope that over time, your home might steadily increase in value.
You have an emergency fund
An emergency fund can play an important role in keeping you financially afloat when the need for a surprise repair suddenly appears.
Some financial professionals suggest keeping three to six months of living expenses in an emergency fund to cover unexpected costs.
As a homeowner, these costs could include replacing a hot water heater, repairing a leaky roof, or making any other big-ticket fixes that creep up on you.
If you have a solid emergency fund, you can enter life as a homeowner with a little extra peace of mind.
You understand the sacrifices of owning a home
Many homeowners have to make sacrifices that they did not have to make when they were renting.
Renting allows you to pick up and move when your lease is up, but you’ll sacrifice that flexibility if you own a home. You’ll also have to commit to a monthly mortgage payment that might exceed your rental costs.
That means a mortgage might restrict your ability to spend money on other things you want, such as exotic vacations or fancy cars. Many homeowners are happy to do so.
You don't have a lot of debt
Homes can be costly. It’s easier to pay for a home and all the costs associated with it if you aren’t already carrying excessive debt.
If you crush your debts before you buy a home, you should be able to breathe easier after you move into your new digs.
Your credit score is high
A higher credit score doesn’t just help you secure a home loan, but also increases the odds that a lender will offer you a lower mortgage rate.
Over time, a lower mortgage rate can save you a lot of money. Having a strong credit score is a good sign that you might be ready to buy a home soon.
You have enough money for a down payment
Traditionally, experts have advised making a down payment of at least 20%. But that has changed over time. In fact, you can qualify for some types of loans by putting down as little as 3%, or even less.
However, a small down payment might mean that your lender will require you to carry private mortgage insurance for a while, which can be costly.
Also, the less money you put down on the house, the higher your monthly mortgage payment is likely to be.
Your source of income seems stable
You can’t predict the future when it comes to your career and the salary you earn. But if things are stable now and appear likely to remain that way, this could be a good time to consider buying a home.
If you don’t expect any major changes in your income or plan to continue working at your current company for at least a few more years, you might have more peace of mind about committing to a new home.
You understand the costs of ownership
There are plenty of costs to consider when buying a home. They start with things like a down payment and closing costs, but they don’t end there.
Don’t forget to factor in other costs, including utility bills, repairs and updates, taxes, and insurance.
If you love your home, you might feel these costs are well worth paying. Just make sure you understand how often you might open your wallet simply to maintain the roof over your head.
You know what you want
Before you even start the buying process, it’s important to figure out what you want in your next home. Do you dream of living in a specific neighborhood? Are you clear about how much square footage you need?
You’ll also need to figure out what type of home you want, from a single-family home to a condo or townhouse.
Have a decent idea of what you want before you start looking. Remember, you can adjust your goals as you search and find that your initial plans might need to change.
Even under the best of circumstances, buying a home can be a daunting task. Lower mortgage rates can make the purchase more affordable, but lower rates alone might not be enough to determine whether or not you should buy right now.
Make sure you understand your financial situation before you plunge in. Having a good, reliable job and a well-funded bank account will be a big help in the home-buying process.
It also helps to have some ideas of what your future plans might be before you leap into a new home. Thinking about these things will leave you better prepared to find the best home for you.