If you’re contemplating whether to buy a home, various factors are likely occupying your thoughts, such as your financial situation, current mortgage rates, housing prices, the scarcity of available homes, and other related considerations. You’re managing these elements to determine their combined influence on your decision-making process.
While housing market conditions are definitely a factor in your decision, your own life and your finances may be even more important. As an article from NerdWallet says:
“Housing market trends give important context. But whether this is a good time to buy a house also depends on your financial situation, life goals and readiness to become a homeowner.”
Instead of attempting to predict market timing, consider directing your attention towards aspects you have you have control over. To gain clarity on whether you’re prepared for your next move, here are a few questions to contemplate:
1. Do You Have a Stable Job?
An important factor to take into account is the stability of your employment. Purchasing a home involves a significant financial commitment, including signing a home loan agreement that commits you to repayment. This obligation can feel substantial, making it essential to assess the stability of your current job situation before proceeding with a home purchase. Knowing you have a reliable job and income coming in can help put your mind at ease. As NerdWallet explains:
“A mortgage is a big commitment . . . Wait until your employment is stable before thinking about buying a house.”
2. Have You Figured Out What You Can Afford?
For a clear understanding of the savings required and monthly expenses, it’s advisable to consult a reliable lender. They can guide you through the pre-approval process, providing information about borrowing capacity, current mortgage rates, estimated monthly payments, anticipated closing costs, necessary down payment percentage of the home’s purchase price, and other pertinent details. This consultation with a trusted lender will help you plan your finances accurately before making a home purchase.
The best part is you may find out you’re closer to your goals than you realized. You don’t necessarily need to put 20% down, unless it’s specified by your lender or loan type. As Down Payment Resource says:
“A 20% down payment on a home is great, but . . . Many mortgages require no more than 3% to 5% of the purchase price as a down payment. Plus, there are loans and grants that may help cover these costs. Search for down payment assistance in your area, and discuss your results with your mortgage lender . . .”
3. How Long Do You Plan to Live There?
The duration of your intended stay is another critical consideration. Accumulating equity in your home involves time as you pay off the loan and benefit from home price appreciation. If you’re planning to relocate shortly, you might not regain your investment. For instance, if you anticipate selling and moving within a year, purchasing a home right now might not be a prudent decision due to the limited time frame for equity growth. As a recent article from CNET says:
“Buying a home is a good idea if you’re planning to stay put for at least three years. Home values typically increase between 2% and 5% annually, so you could end up paying more in closing costs than you’d earn in proceeds if you sell after only a year or two.”
So, think about your future. If you plan to transfer to a new city with the upcoming promotion you’re working toward or you anticipate your loved ones will need you to move closer to take care of them, that’s something to factor in.
Above all else, the most important question to answer is: do you have a team of real estate professionals in place? If not, finding a trusted local agent and a lender is a good first step.
While considering your readiness to buy a home, these questions can be helpful. However, the most dependable source of guidance comes from trusted real estate professionals. Their expertise and insights can provide you with comprehensive information and help you make an informed decision about purchasing a home.