Deciding to buy a home is likely one of life’s biggest choices. Since a home purchase is also one of the largest investments—if not the largest—most people will ever make, moving forward warrants careful consideration.
Of course, headlines about the housing market and the economy, and chatter from friends and coworkers can certainly complicate your decision-making process. A host of pundits and well-meaning loved ones may steer you toward trying to “time the market” —in other words, buy a home at the optimal time that will yield the best return on your investment.
The problem is, there really is no such magical point in time and waiting for it to arrive could cause you to miss out on the perfect home in the perfect neighborhood. That said, there are several circumstances that should cause you to press pause on your home-buying plans. Here are a few considerations to help you decide whether now is the right time for you:
Do you have enough for a down payment? Consider whether you comfortably have enough cash on hand for the right-sized down payment. While you may be able to piece together a large enough sum to get you in the door, what does that amount mean for your monthly mortgage payment? If your monthly payment is too high and will put you in a tight place financially, then it might be better to save until you can put down a larger down payment. Alternatively, you may want to consider a home in a lower price range.
Should you wait until interest rates come down? You may be aware of the fact that interest rates hit unprecedented lows during the height of the pandemic, as low as 2 – 3% in fact. While anything is possible, it’s relatively safe to say that we won’t see those rates again, barring another global event like the coronavirus. Sure, rates have risen since then, but keep in mind they are still historically low. In the 1980s for example, interest rates were as high as 18%! Waiting on better rates should not be a factor in moving forward.
Do you have job security? In addition to the down payment, the biggest financial factor to take into consideration when thinking about buying a home is your current and future income. Unlike renting, in addition to your monthly mortgage payment, homeownership comes with a variety of additional expenses, such as utilities, maintenance, lawn care and unexpected scenarios like an appliance that breaks down or a tree branch that needs to be removed. Make sure you’re comfortable with your source of income for the foreseeable future and are not planning a job change anytime soon.
Do you have a cushion? While many people throw everything they can at a down payment, leaving yourself without a cushion is a dangerous way to enter into homeownership. Make sure you have at least a little something left over before moving forward on a home purchase.
Do you have an imminent life change approaching? While a life change such as having a child or getting married is often what steers people toward home-buying, some life changes should cause you to consider delaying your plans. For example, is there a career change in your near future that may warrant a relocation? Or are you expanding your family soon with more children or aging parents that may require more space? The bottom line is, if you’re going to need to sell the home you buy in a relatively short period of time for whatever reason, you may want to wait. A home is one of the most reliable investments you can make, but it is a long-term investment that you may not see the benefit of if you sell too soon after buying.
Answering these questions can help you determine if now is the right time to buy a home, but talking to a local real estate professional will guide you even further.
