Buying a home is one of the biggest purchases you’ll ever make. So, it makes sense that you’d want to do it at the perfect time, when you can get the best deal on your investment.

There will always be lots of things you’re considering when making such a big life decision. Mortgage rates are at historic lows, which can make it really enticing to buy now. At the same time, the seller’s market we’re currently experiencing can make it more difficult to find inventory. With the fast-moving housing market, you might be left wondering if now is really the right time to buy a house or if you should wait.

But these market conditions aren’t the only thing you should consider in your decision-making. We’ll walk you through financial considerations, reasons to go ahead with a home purchase, and other aspects that may lead you to pump the brakes. Thinking through these will help you feel confident in your decision on buying in today’s market.  

Signs You’re Ready To Buy a House

Before you consider market conditions and which way the housing market is headed, you need to make sure you’re truly ready to buy. Here are some signs you’re in a good position to move forward with a home purchase.

  • You have a stable income. You’ll need to demonstrate a dependable, steady source of income to make your monthly mortgage payments in order to be approved for home financing. You’ll also want the ability to easily cover homeownership costs like insurance, property taxes, utility bills, maintenance, and repairs.
  • You have a handle on your debt. Most lenders base loan approvals on an applicant’s debt-to-income ratio (DTI). DTI is calculated by taking your total monthly bills and dividing that by your total gross monthly income. You should generally aim to keep your DTI ratio at 43% or less. If you have too much debt outside of a mortgage you’re paying off, it might not be the best time to buy a house.
  • You have saved up for a down payment and closing costs. While different loan programs have varying requirements for how much of a down payment you’ll need, there are benefits of putting down a larger down payment. Homebuyers also typically pay the closing costs, which on average are between 2-5% of the loan amount.
  • Your credit score can get you qualified for your loan program. Each loan program will also require a certain credit score, with most loan programs requiring a FICO score of at least a 640. The higher your score is, the more loan options and better mortgage rates you’ll be likely to qualify for.

Reasons to Consider Buying a House Now

When gearing up to buy your first or next home, it’s just as important to think through your personal readiness as it is to understand what’s happening in the housing market. These are a few reasons you might consider buying right now.

  • Mortgage rates are historically low. Rates have been low since the spring of 2020, partly because of the federal funds rate cuts made in response to the pandemic. This is one of the biggest draws to buying a house right now since a low interest rate can save you thousands of dollars over the course of your loan.
  • Owning beats renting. Buying a home is almost always going to be a better financial investment than renting. To compare your rental situation, you’ll need to add up your total monthly rental expenses and compare that to the estimated monthly mortgage payment you’d make on a home in your budget. Even if renting is a cheaper payment, remember that you’re investing in your home’s equity with each mortgage payment. When you factor in this home equity aspect, it’s typically a better investment to buy than rent.
  • Rising home values create equity. If you buy while the market’s hot like it is now, and conditions continue trending upward, the value of your home will rise over time. While no one can predict the future and it’s not guaranteed your home’s value will increase, you can generally expect to see boosted equity as the years go by. 
  • Buying makes sense for where you are in life. Your decision to buy shouldn’t be entirely based on the market. It needs to make sense for you and your family. Maybe your family is expanding and you’ve outgrown your current home. Or perhaps you’ve recently become an empty-nester and are downsizing. There are certain seasons of life that just make sense for you to move and buy a new home.

Reasons To Consider Waiting To Buy a House

While buying a home is a dream most people look forward to, there are some practical reasons you might think about waiting.

  • Wait for less competition. We’re currently in a seller’s market. This means that the number of people buying houses is greater than the number of houses for sale. This results in higher purchase prices than normal and buyers participating in bidding wars. Getting your offer accepted in these conditions is challenging, but not impossible. There are steps you can take to help get your offer accepted, but you might consider waiting for a time when there’s more inventory to choose from.
  • Property values could drop. When there’s a seller’s market, the competition tends to dive up home prices. The real estate market rises and falls just like any other cyclical industry, so you could wait and see if housing prices drop into a range of the budget you’re more comfortable with. But remember, there’s no guarantee of if or when this will happen.
  • You want to spend time getting finances in shape. As you think over the reasons to buy or wait that we’ve covered, there may be some areas in which you feel you need some improvement before you buy a home. Maybe you’re thinking of switching jobs soon or making another decision that will affect your income. Maybe you’re focusing on paying off student, car, or personal debt, and tacking on a monthly mortgage payment won’t work right now. Or maybe you need to work on your personal budget and save up for a down payment. It’s best to buy a home when you’re in a financially fit state, so it makes sense to get things lined up so you’re comfortable and excited about embarking on your homeownership journey.

How To Decide if You Should Buy a House Now

There’s no one-size-fits-all answer for whether you should or shouldn’t buy right now. Every local housing market is different, as well as the circumstances affecting your finances and life situation. The first step is making sure you can check off having a steady income, a handle on your debt, enough savings, and a good credit score. Then take into account the market conditions. If you feel like you’re in the right place to move forward and you feel comfortable with your decision, then you’ll know it’s a great time to buy.

If you have questions about homeownership or are ready to start on the exciting adventure toward buying your first or next home, connect with one of our expert loan officers today to discuss next steps.

The included content is intended for informational purposes only and should not be relied upon as professional advice. Additional terms and conditions apply. Not all applicants will qualify. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. This is an advertisement. Prepared 10/21/2021.