Maybe you just received the news that you’re expecting a new addition to your family. Or a home you’ve had your eye on in the neighborhood just went up for sale. Perhaps you’re tired of city life and want more space in the suburbs. No matter what the reason, at some point you’ll need to decide whether the time is right to buy a house.
There isn’t an exact science to determine when it’s the best time to invest in a home, but there are some common factors you should consider. Let’s take a look at five things that can influence whether the time is right for you.
1. Your financial situation.
Purchasing a home is one of the largest investments you’ll ever make, so you should be sure you’re prepared to take on this financial commitment. Here are a few questions to ask yourself when evaluating if you can afford to purchase a home.
- Do you have a down payment saved? The traditional 20 percent down is still ideal to increase your chances of being approved for a mortgage and to receive a better rate. If this isn’t a possibility, there are programs to help you purchase a home with a lower down payment.
- Is your credit score high? Your credit score is one of the primary factors in determining whether you get approved for a mortgage. Lenders have different minimum credit scores they are willing to accept, but generally your score should somewhere between 620 and 680 when applying for a mortgage.
- How much mortgage can you qualify for? Most lenders base their loan qualification on your total monthly gross income and monthly expenses. These monthly expenses include property taxes, private mortgage insurance, association dues, insurance, credit card payments, student loans, etc. You can use our financial calculator to estimate how much mortgage you can afford.
2. Market conditions.
The housing market is affected by a variety of factors outside of your control, including interest rates, home prices and the local economy. If houses are sitting on the market for more than six months, then the market is slow and prices will be lower for buyers. On the other hand, if properties are being sold in months – or even weeks – this is referred to as a seller’s market. In this situation, you’re likely to experience bidding wars that drive up prices. A real estate agent can help you navigate the market, but just remember – conditions can change at any time.
3. Mortgage rates.
Interest rates fluctuate depending on key economic factors and real estate market conditions. Mortgage rates have risen recently, but are still low relative to historic averages. If it seems like it is the right time to buy a home, it might be wise to take advantage of current interest rates before they inch up higher.
4. Seasonal trends.
Conventional wisdom says spring is the best time of year for selling and buying real estate. As the weather warms, for sale signs begin to pop up and there is a good inventory of properties on the market. However, one in four U.S. homes sell above initial list price in March through May, which is higher than at any other point in the year. This is good for sellers, but buyers should consider waiting to buy a home in late summer or fall. According to a recent study from Zillow, late summer offers a nice compromise between reasonable prices and selection.
5. What’s happening in your area.
In addition to seasonality, what’s happening in your local market can have an impact on whether it’s a good time to buy a house. Some markets are more expensive than others, and in some areas listing prices are appreciating faster than the rest of the country. An experienced real estate agent can help you understand local market trends so you can decide if and where it’s right for you to buy.
If you considered these factors and all signs point to home ownership, you’re sure to have mortgage questions. Our mortgage experts can walk you through the mortgage application process, explain all available options and help you make the best choice. Contact one of our mortgage representatives to request a consultation.