Buying a house is an exciting process. If you have been saving up for a down payment and working hard to pay off your other bills, you are likely anxious to get started on the task of locating your next home. But when is the right time to buy? This is a huge financial decision, so you naturally want to make sure the timing is just right.
The list of tips below should help you determine exactly when is the right time for the purchase of your new home.
Do the Monthly Math
One of the biggest points to consider is whether or not you can afford the monthly payments which will be required to afford the kind of house you desire. Take a look at your monthly budget to determine exactly how much of a payment you can take on. Then, use a mortgage calculator to determine how much home you can buy while remaining in a comfortable payment range. You don’t want to get in over your head when you buy a home, so take some time to do this monthly math and be realistic with your conclusions.
Remember the Down Payment
You are going to need cash upfront in order to buy your new home. Depending on the type of loan you plan to request, you may need anywhere from 5% – 20% available for a down payment. Obviously, this can quickly add up to become a sizeable amount of money. A 20% down payment on a $500,000 home is a whopping $100,000, so don’t take this part of the equation for granted. Before you begin the shopping process, make sure you have the cash available to close a deal.
Watch the Market
In the months and years leading up to a home purchase, it is smart to follow the real estate market in your area. Have housing prices been on the rise, or are they staying flat? If you already own a home, you will want to know how much equity you have in your current property, as you may be planning to use some of that money to fund the down payment on your purchase. Interest rates are a factor as well, so talk with your bank to get an indication of where rates in your area are sitting.
Know Your Credit Score
While you don’t have to have perfect credit in order to secure a mortgage, you do want to have your credit score is the best possible shape going into this process. Make all of your payments on time, pay down your debts as much as possible, and avoid opening any new lines of credit. If you can go into the home buying process knowing that your credit score is in good condition, you will be in a strong position to negotiate a great deal.
Buying a home can be stressful, but it is also quite exciting. There is no perfect time to buy a home, so keep an eye on the market and be ready to jump into action when you feel comfortable with all of the points listed above. Good luck!