When’s the Right Time to Buy a House?

Buying a house is a big investment, and understanding when to make such a purchase in a changing U.S. housing market can be a big decision. However, a solid understanding of your personal financial stability and the lay of the land in terms of real estate values and buyer’s options is key to knowing when to buy a house.

How Stable is Your Income?

One of the first things to do when building and repairing credit is to have a stable source of income and a solid budget and investment plan for the future. Apart from the ability to manage expenses, a stable income helps determine your qualifications when seeking a home loan. Fewer gaps in employment and staying with the same employer or in the same field of employment improve your chances for approval. A home mortgage usually runs for 30 years, so building a plan for the next 30 years means you’re better prepared. 

Having a budget allows you to strategically allocate your income over the long term and to live below your means, a critical component, as well as to determine the percentage to contribute to your retirement account. Employers will often match your personal contribution to a 401(k) plan, and investment in stocks or bonds or indices leads to a decent percentage of savings growth, especially with compound interest over a term of 30 years.

How Much Can You Afford?

Make an assessment of your options and how they match up to your current and projected spending ability. Again, a budget is fundamental. According to City Creek Mortgage, if you take the median U.S. income of 61,372 in a conventional 30-year mortgage, you can afford a monthly payment of 2,301.45 assuming no debts. With debts, you need to subtract that monthly payment amount from the potential monthly payment you can make on your mortgage to figure out what you can afford. 

A budget can also get you clear of credit card debt quicker, and your credit score can affect your options. On a scale of 300 to 850, falling below 650 can be considered subprime. Even a few points on your credit score can mean falling below that and a difference in down payment and thousands of dollars in interest rates.

Do Your Homework

Really, the best time to get a house is when you can afford one. Trying to time the market can be tricky. For example, substantial increases in real estate mortgage rates are notoriously unpredictable and shouldn’t affect the timing of when you choose to buy. However, taking time out to understand the market can contribute to your decision making. Real Estate Skills suggests getting an estimate on the house with comps, or comparables, based on the surrounding neighborhoods. Also, check whether your state offers financing or down payment assistance. Waiting to buy until you’re married shouldn’t be a factor as a significant percentage of home buyers are single and building equity sooner, but you might want to wait until winter when prices are lower.

Personal reasons come into play when deciding when to buy a house, such as having a home in which to raise a family. However, the right time to buy a house is when you’re prepared and when you can afford to get one. Take a real look at your income, savings, and credit score, and make a budget for future spending to find out if you can comfortably afford a mortgage on a home you’ve set your eye on.

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