November 11th, 2019 9:11 AM by Jackie A. Graves
Saving up for a sizable
downpayment is a big part of knowing if you should be in the market for a home,
but it is far from the only consideration.
Interest rates, credit
scores and life situation are all big factors.
your own home has long been part of the American dream. It’s a goal most of us
rightfully aspire to, and one that can often help build wealth. Indeed, 64% of Americans own a home today.
If you’re considering buying a house, you’ll want to look at a few things
first, such as your overall financial picture and the total cost of home
ownership. You’ll also want to understand current interest rates and home
We’ve all heard the rule of thumb that
you should ideally have 20% of the purchase price saved for a down payment on a
home. Although you can qualify for FHA mortgage loans with
as little as 3.5% down, a 20% down payment is still a much better idea, because
you won’t need to pay private mortgage insurance, will have lower monthly
mortgage payments, and will pay less interest over the life of the loan. You’ll
also be less likely to end up underwater on your mortgage should housing values
So, one way of gauging when it’s the
ideal time to buy a home is when you can afford a 20% down payment on the home
of your choice. But wait — you’ll also need to factor in other costs, such as
insurance, closing costs, moving costs, repair and maintenance, property taxes,
and so forth. Use a mortgage and housing cost
calculator to determine whether you can still afford your home
when all these costs are combined.
Another rule of thumb: Are you depleting all your savings with the
down payment? If you’ll have no emergency savings left, or if you need to
liquidate retirement accounts, then you should likely continue saving until
your overall financial situation can accommodate the major expense of home
You’ll also want to assess interest rate
offers: Mortgage rates have been historically low for years now, but even so, you’ll
qualify for the lowest rates only if your credit is good, above a 720, or so.
The best time to buy a home, according to this rule of thumb, is when your
credit score is strong, and you have access to the lowest rates. Work on paying
down debt and improving your credit score in order to receive the best interest
rate offers from lenders.
And finally, deciding when it’s the best
time to buy a house also rests on how long you envision yourself in the home.
If you can foresee needing to move within a few years, consider the costs
involved in selling the home and moving, which may erode any gains. If you are
planning on growing your family, downsizing, or otherwise significantly altering
your life circumstances (including slowing down in your career, or retiring),
you might also find yourself seeking a new housing situation sooner, so plan
your purchase accordingly.
In short, the best time to buy a house is
when you have enough saved for a down payment such that your overall financial
condition won’t suffer after the purchase; when your credit score is strong and
you’ll qualify for the lowest rate; and when property market conditions in your
area reflect realistic pricing. And don’t forget to consider how long you
intend on living in the home, as this may affect your finances, too.
Happy house hunting!
To view the original article click here