Due to the booming housing market, mortgage interest rates keep hitting record lows this year. Currently, the average interest rate for a standard 30-year fixed mortgage is 2.78%.
But, just because you may be able to get a good deal on financing, that doesn’t mean you should start immediately shopping for a new home. Instead, you need to make sure you’re ready for a new home and that you’re buying at the best time for you.
Keep reading to learn the big signs that will tell you when to buy a house.
You Need to Move to a New Location
Most often, the home buying process is started because someone is moving to a new location. Whether you’ve received a new job offer or are just trying to move closer to family, you’re now in the market for a new place to live.
If your move is sudden, it may be best to find a place to rent for a few months until you can find the perfect home. Also, consider renting to make the home buying process easier if you are embarking on a long-distance move. You don’t want to put an offer on a home without ever stepping foot through the front door.
If you aren’t sure that you’ll stay in this new town for several years, consider the other reasons for buying below. You’ll want to make sure that buying a home versus renting one is the right decision.
When You Can Afford an Upgrade
Buying a house can be an extremely exciting process, especially when you’re looking to make an upgrade.
But, you want to make sure that you can actually afford and justify your upgrade. Just because you think you deserve a nicer house, doesn’t mean that it’s the right decision.
A general rule of thumb is that your housing expenses, including homeowners insurance and taxes, should not exceed 25% of your take-home pay. So, calculate your current income and housing expenses to see if you have room in your budget. If you’re below 25%, you can easily justify an upgrade in housing.
To get an idea of how expensive an upgraded home will be, browse homes for sale online to see what they’re selling.
Your Family Situation Is Changing
Sometimes, your family circumstances mean that a move is necessary. This could mean that your household is growing or shrinking. Or, maybe your family’s needs have changed over time.
For example, if you live in a one-bedroom home but are expecting your first child, you probably want to consider purchasing a family home. Or, if all your children are grown and you’re now an empty nester, you may want to consider downsizing.
Family needs also come into play. Maybe you’re getting older and need to have your bedroom on the main floor. Or, maybe you have started your own business and need a home office.
When considering whether your changing situation warrants a new home, keep in mind how permanent that change is going to be. If you feel that this changing situation is going to affect your life for several years, then it’s probably worth moving.
If the Buying Market Is Favorable
You also want to consider whether now is the best time to buy a new house according to your local housing market. Just because national mortgage interest rates are low, that doesn’t mean that it’s the best time to buy a home in your desired location.
This year, houses are on the market for an average of 54 days. So, if houses locally are selling quicker than that, then you’re in what is considered a seller’s market. This means that since there is a large demand for housing, sellers can charge more for their houses and be picky about who they sell it to.
Ideally, you’ll want to wait until houses are staying on the market for longer than the national average. This is when you can find a better deal and shop for the perfect home without feeling pressured.
Your Finances Are in Order
One of the most important steps to buying a house is making sure that your finances are in order. Just because your housing expenses are under the recommended 35% of your household income, that doesn’t mean you can automatically afford to buy a home.
Buying a home is an extensive process and you need to make sure that you’re financially ready.
Is your credit score good enough to get you a favorable mortgage rate? Is your debt-to-income ratio low enough that a lender will grant you a mortgage? Do you have enough money saved for a down payment?
Before you start actually shopping for a home, meet with a mortgage lender and ask to get pre-approved. This will give you a good idea about whether you can truly afford the type of house you want.
Now You Know When to Buy a House
After reading this article, you now know the best times and circumstances when to buy a house.
Many people buy new houses when they need to move to a new location, can afford an upgrade, or have a change in their family situation. A good time to buy is when the housing market is favorable so that you can get the best deal possible. In addition, you need to have your finances in order and get pre-approved for a mortgage before you start shopping.
Are you ready to move but not sure if your finances can handle the expense? Be sure to head to the Money section of this site for all the best financial advice.