About 64 percent of Americans are homeowners.
If you aren’t part of this group, there’s no doubt you dream of owning a home as soon as you can afford it. After all, the perks of homeownership are unbeatable. It’s not only a solid investment that will certainly gain value of time but also entitles you to tax deductions and gives you greater control over your household expenses.
However, just because homeownership is your ultimate dream doesn’t necessarily mean you should snap up one without making a number of major considerations.
So, when is the best time to buy a house?
Continue reading for deeper insight.
When You’ve Figured out the Type of Home You Need
Did you know some prospective buyers step into the market without a clue on the kind of home they need? Don’t make this mistake.
A home, especially when it’s your first property, is a major investment. You’re going to spend a lot of money on it, so you want to be sure you’re making the right decision. You don’t want to buy, say a 4-bedroom, single-family house, only to realize a couple of years later it’s too big for you.
Establishing the best time to buy a house starts with figuring out the exact type of property you need. To do this, evaluate your family needs.
For example, if you’re a single right now but plan on having a family of four in the future, you need to buy a home that will accommodate your family as it grows. If you don’t factor this, you might end up buying a small property that you’ll be forced to sell when your family grows.
When You’ve Got a Solid Income and Adequate Savings
The median price of a home in the United States, as of April 2020, was about $250,000.
If you’re anything like most people, you don’t have this kind of money sitting in your bank account. As such, your only feasible path to owning a home is through mortgage financing.
Taking out a mortgage is a savvy decision, but there are requirements you need to meet.
First, you need to prove that you have a steady, reliable income and that from this income, you’ll be able to service the mortgage. A mortgage adviser can advise you on the level of income you should have when you’re looking to buy a certain type of home.
Second, most lenders will require you to make a down payment before the mortgage is approved. The average down payment is 5 percent of the price of the home you want to buy. If the home will cost $250,000, you’ll put down at least $12, 500.
Your Credit Score Is Looking Good
Another crucial element lenders will consider is your credit score.
A credit score is a numerical summation of your credit history. If you’re always paying your credit card balances on time, servicing your personal loans, and settling utility bills on time, your credit score is probably good or excellent.
However, if you’re perpetually late on settling your bills or have defaulted on some loans, your score could be bad or poor.
You know you’re ready to buy a home when you’ve got good credit.
Bad or poor credit will certainly get your mortgage application denied. If you’re lucky enough to be approved (most likely because your income is impressive), you’ll be slapped with a higher interest rate.
On the other hand, good credit will get your application approved, as long as your income meets the lender’s minimum requirements. You also stand a good chance of getting a low interest rate, which will save you money.
In general, the financial aspects of buying a home carry a lot of weight on your decision-making. You shouldn’t buy a home unless you’re on a solid financial ground (no risk of losing your income). If you lose your income after purchasing a home, you might not be able to service the mortgage, leaving yourself exposed to foreclosure.
Property Values Are Low
The residential real estate market is ever-moving. There are a couple of factors that influence the movement of property values, but the economy has the biggest influence.
When the economy is thriving, interest rates will rise, as will the value of homes in most regions across the country. But when the economy is on a slump, interest rates fall, as does the value of homes. Check out these trends for more information on how the market is changing in 2020.
Ideally, you want to purchase a home when values are at the bottom. This way, you’ll get a good deal and your property has a good chance of gaining more value as the economy picks up, earning you more equity in the process.
In fact, 2020 is a good time to buy a house. Although unforeseen, the COVID-19 pandemic has ravaged the economy, triggering a downturn. Interest rates are as low as they can get right now, meaning you’ll also get a low rate on a mortgage!
Warmer Months Vs Colder Months
Any real estate expert will tell you that time of the year influences home-buying decisions. Correct, but it all comes down to your personal preferences.
If your primary focus is to get the absolute best deal financially, you’ll have a better chance during winter. During colder months, activities in the real estate market slow down. People are holed up indoors, so there aren’t many properties or buyers in the market.
Since there’s low demand, you’ll have greater negotiating power, as long as you’re able to find your ideal property.
During the warmer months, there’s a flurry of activity. Several people are buying and selling. Competition is higher. Unless you’re an experienced buyer, getting a good deal is hardly possible.
When Is the Best Time to Buy a House? Depends!
If you were looking for a one-off answer to the question “when is the best time to buy a house?” you’re probably a bit disappointed. On the brighter side, you’re now more knowledgeable on the various factors that go into determining the best time to buy a house. In other words, the best time for me isn’t necessarily the best time for you.
Keep reading our blog for more tips on real estate and homeownership.