It may seem like the real estate market is stabilizing, and it may feel like everywhere you look someone is buying a home for a steal. There are "for sale" signs in almost every neighborhood across America, making it seem like a perfect buyer's market. But how do you know if this is theright time to buy a home? Buying a home is the biggest purchase most of us will ever make. How do you know if it is time to buy or if it would be better to put off buying a house?
When is a Good Time to Purchase a Home?
There is so much to consider when it comes to deciding the perfect time to buy a home. Here are three questions to ask yourself to help you decide if it is a good time for you to purchase a home or if you should put off buying a house for a while.
Do You Have a Stable Job?
In determining if you are ready to buy a house, a stable job is important for the obvious reason of having steady and reliable income. Clearly, if you are in an unstable situation in terms of your income, then you may need to put off buying a house. Getting a mortgage isn't the same as signing a six month or a year long lease. If your job or income were to change and you could no longer afford rent, you may have to pay a penalty and hurt your credit, but it would not be nearly as bad as the hit your credit would take if you were to default on a mortgage. Just as important as income is knowing that you are going to be sticking around for a while. Do you have the possibility of being transferred any time soon? Are you unhappy in your job and think you may start looking for a new position? Is your company in the midst of a round of layoffs? If you purchase a home based on your current income and job location, you may end up in a tough situation if you find yourself in a new job that pays less or that would make your commute brutal or impossible. When deciding if it's the right time for you to buy a house, it is important to know you are committed to living in it for a while.
How Much Money Do You Have Saved?
Many first-time home buyers finance their home purchase with a low down payment (as low as 3-5% in some cases) and an FHA loan. 100% loans are no longer available and even if they were, it probably wouldn't be the best option. You need more than your down payment saved up in order to responsibly enter into a new mortgage. Most significantly, closing costs (miscellaneous sale and loan processing fees) which typically run between 2% and 3% of the cost of home are due at closing. While closing costs may sometimes be taken care of in part or whole by the seller, hidden costs may still come up. There are also the costs of inspections and moving to be considered. If your down payment is going to wipe out your savings and take away any cushion you have for unexpected events, then you may want to put of buying a home.
How Is Your Credit?
If your credit is not in good shape, it will be difficult to be approved for a mortgage even if you have a substantial down payment. Mortgage lenders are just not willing to take a risk and approve a loan to someone with less than desirable credit. Generally speaking, if your credit score is below 620, the chances of your getting a mortgage are not very good. Even if you are approved for a home loan with less than good credit, it may not be at a very desirable interest rate.
Purchasing a home is a big decision and each situation is different. These three questions are a good starting point for you to consider whether it's the right time to buy a home.
