If you’re in the market for a house, it can take a lot of time and research to settle on one that’s not only affordable but that you’ll be happy living in for, potentially, the rest of your life. Then again, you might come across a perfect house a few days into your quest, one that many other potential homeowners are eager to buy. So, is there ever a right time to purchase a new home? When you find a worthy dwelling and are making enough income to finance it, then it might seem like a good time. Then again, what about all the other factors and problems that come with being a homeowner, ones that could have an impact on both your finances and your future decisions?
For most Americans, buying a house, no matter where it is or how many they’ve owned in the past, is the most expensive thing they’ll ever invest in. This is why the decisions to purchase a house should not be taken lightly. Below, we have a list of some of the more pressing homeowner’s issues that should be studied when you’re in the market for a house.
Debt Caused by High-Interest Rates
In today’s real estate market, a decent house can cost hundreds of thousands of dollars. Even with reasonable payment plans involved, for most people, a mortgage will take around 30 years to pay in full. Not only this, but the expenses are only going to grow once you’ve bought the house and started moving in. Unlike your credit card bill, paying a minimum balance on your mortgage is not an option, you have to make full payments on time, every single month. For this reason, alone, it’s extremely important, before you decide to purchase your dream home, to deal with any and all other debt, especially high-interest debt from credit cards.
What is Revolving Debt? Click here to find out.
Keeping an Eye on Mortgage Rates
The constant fluctuation of mortgage rates in the United States can also cause a potential homebuyer to question their decisions while they’re searching for a house. In the United States, mortgage rates have been on the steady rise since 2014, nowadays you should expect around 4.32% for an average 30-year fixed mortgage, depending on what state and or area you’re looking to buy in. Since most real-estate experts are currently speculating that mortgage rates are only going to continue to rise, keeping an eye on the real estate market before purchasing a house should definitely be a priority for you.
It’s also important to remember that interest rates are likely going to go up and down with the housing market. While the interest rate on a mortgage might be somewhat reasonable now, it might not be in a few years, so it can be beneficial to look into an accelerated payment plan. This way, you’ll pay more each month, but you’ll be able to pay off the principal of your mortgage payment faster, saving you some money in interest charges on the backend.
Want to know How to Pay Off Your Mortgage Early? Read this.
Buyer’s Market or Seller’s Market?
In recent years, the United States has experienced a bit of a housing shortage. Because of the shortage, depending on what state/area you live in, you could bear witness to a “seller’s market.” This generally occurs when there are more potential homebuyers looking to purchase a house in a popular area, but not enough decent houses there to go around. So, if the current area you live in is a hotspot, you might be able to sell your current house at a value that’s above the previous asking price.
For instance, according to MarketWatch, houses in cities like San Francisco, Washington D.C., and Columbus, Ohio are very high in demand. So, if you’re looking to buy a home, it’s important to keep an eye on the real estate market to see which locations are growing in popularity. If you want to move into an area like this, you’ll likely pay more than the house could be worth, so make sure your financial situation is suitable enough to afford it in the future. If not, looking for a house in a different area or postponing your search until the market is in a more sensible place might work out better for you.
Qualifying for a Mortgage
While finding your dream house might be easy enough, qualifying for a mortgage is not always as easy. Actually, the mortgage application process comes with a lot of strict guidelines that need to be followed in order to qualify. Not only will your finances be subject to review, but things like your credit history, assets, and record of residency and employment for the last two years will be taken into consideration. You’ll also need to provide the proper documentation. Then, once your application is approved, it can take upwards of 45 days to secure. Certain states will also have prolonged waiting period for the appraisal process, which can drag out the time it takes for your application to go through.
Once you’ve been approved and have secured your mortgage, the amortization period will begin, where you’ll pay off the home in installments over a maximum of 30-years. The longer amortization period on is, the smaller the monthly payments will be. However, the lower the regular monthly payments are, the more interest you’ll generally be charged from month to month. Just remember, in the United States, a down payment of at least 20% of the home’s total value is usually required. All of these costs need to be taken into account before you start looking at houses. If a lender determines that you are not financially stable enough to support these costs, your application might be rejected. Making yourself a budget is a good way to determine if you’ll be able to afford the current and future costs of your potential house.
So, When is it the Best Time to Buy a House?
Taking all these issues into account, then doing a proper assessment of your financial stability (checking your credit regularly is also suggested) is the best way to decide if it’s the right time for you to purchase a house. You might wander into an open house one day just for fun and decide that it’s your dream home. However, it will certainly work out in your favor to be patient, keep an eye on changes in the real estate market, pay off any previous debt you might have to take care of, try to live with a proper budget, then go from there. Once you’ve calculated the costs and saved up enough for a down payment, you’ll be that much closer to reaching the goal that so many Americans strive towards, owning your dream home.