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The Right Time to Buy a Home

When is the best time to buy?

Young family moving into new home-1

Is it a good time to buy a house? If you've found yourself asking this question lately, then it is clear that you have some desire to buy. What you're unsure of is whether or not buying is a smart move for you right now. The right time to buy is when you can afford to do so, but even that is a bit of a vague statement, so here is a closer look at some factors you should consider to determine if it's a good time for you to buy.

How much money do you have saved?

Experts often recommend saving at least 20% of the home's purchase price as a down payment. There are government-backed mortgage programs, such as FHA and VA loans, which allow you to buy a home with a smaller down payment. However, if you put less than 20% down, you will typically need to pay for private mortgage insurance, which costs about 1% of your loan amount per year.

Saving 20% is a good goal if you do not need to buy a home too urgently. If you really need to buy soon—and you know you qualify for an FHA or VA loan—then you can get away with saving 10%. Do make sure you have at least this much saved. Even if you end up only putting 3.5% down on the home, you will need those extra funds to pay for closing costs like lawyer's fees and title searches.

Can you get approved for a mortgage?

If you can't get approved for a mortgage, it is not yet time to buy a home. Most banks consider your income, employment history, credit score, and savings to determine whether or not you're a worthy borrower. To qualify for an FHA loan, you need a credit score of at least 580. Conventional loans require even higher credit scores. If your credit score is lower than this, work on increasing it before you apply. Use a credit card and pay it off every month, and pay your bills on time—your score should rise in the coming months.

Do you plan on staying in the same place for a few years?

It's not financially advantageous to buy a home if you're only going to live in it for a year before selling. If you have a stable job and no plans to move anytime soon, then this is a sign you're ready to buy. On the other hand, if you are unhappy in your job and are thinking about leaving, or if you feel your job may not be stable, you may be better off renting for a little longer.

Do you know what you want and will need in a home for the next few years?

It's never smart to start shopping for a home until you know what you're looking for. You do not need to have your whole life planned out before you buy, but you should have a general idea of what the next few years will bring. If you are not certain whether you plan on having kids or not, for example, you may want to delay shopping until you make that decision. You would not want to buy a 2-bedroom home and have to sell it a year from now after you decide you want to have kids and need more space.

If you know what you want, plan on staying put, can get approved for a mortgage, and have saved responsibly, then you're ready to buy. Start applying for mortgages and find a real estate agent to represent you. Happy house hunting!

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