Is Now the Right Time To Buy A Home?

WHAT IS THE PRE HOME-SEARCH PHASE?

When considering home ownership, the PRE HOME-SEARCH PHASE is crucial when considering homeownership. It's the time when you and your family sit down and decide if it is the right time to actually buy a house!  As a Realtor, I'm biased towards buying a home, but I understand it's not always the right move for everyone.

SIGNS THAT IT IS NOT THE RIGHT TIME TO BUY A HOUSE!

Buying a house is the American Dream, but it is not the right dream for everyone.  So when you are sitting down with your family, here are some things to look at that are signs that it may not be the right time to buy a house:

• You have a low credit score!  Most banks have a minimum credit score you need to have in order to buy a house.  If you do not have a credit score that meets the minimum requirement, you may not be able to buy a house with a loan.  And if you do meet the minimum credit score that the bank requires for you to get a loan, then keep in mind that the higher your credit score is, the better the interest rate you will get.  With today's higher interest rate, even a 1/2% change in the interest rate could mean a much higher payment!
• You will have to put more than 30% of your income into the monthly payments!  That is a big chunk of money that would have to go into housing - most experts recommend that you spend no more than a third of your monthly income on housing costs.  I know that with the higher interest rates, this could seem impossible, but it is something that you need to take into consideration when considering if now is the time to buy a house!
• Do you have an emergency fund in place in case of an emergency!  This emergency fund should not be your down payment money - it should be a separate fund!  When you are renting, you know when the rental will be up and you can get an idea of what the rent increase will be!  But if you have a job loss or a medical emergency, defaulting on an mortgage because you don't have an emergency fund to help during this time will have a bigger impact on your credit score than moving at the end of a lease!
• Are you able to put anything into savings!  You want to make sure that you are still able to put money into savings for things like vacations, kids educations, large purchases!  You do not want to be house poor!
• Do you plan to move within the next 5 years!  The real estate market since Covid has been very very hot and homeowners have seen great appreciation year over year on their homes.  However, the market has it's ups and downs and when the market cools down, you want to be in your house at least 5 years to allow it to appreciate enough to cover your costs of the sale and allow you to move onto the next chapter of your life!
• You are only considering the sticker price!  Remember, buying a house involves much more than the actual cost of the house - you need to take into consideration things like closing costs, moving costs, the cost of the insurance, taxes that are rising each year, utilities, renovations and, of course, maintenance!

SIGNS THAT IT MAY BE A GREAT TIME TO BUY A HOUSE!

So the above are signs that you may not be ready to buy a home!  But there are also some good signs that you are ready to buy a home, even in today's real estate market.  These include ---

• You have decent to good to awesome credit!  If you have good or awesome credit, then you probably have the ability to manage your debt and the lender is probably willing to lend to you at much more favorable rates!
• You have a great savings account!  Although putting down a 20% down payment would be great (as you will not have to pay the mortgage insurance), for many buyers saving up a 20% down payment may be hard.  But if you have at least the 5% down payment, then it may be time for you to buy a house!  But keep in mind that putting down 20% not only gets you out of the mortgage insurance expense, it also means that you have a smaller monthly payment!
• You have a stable income!  If you have been on your job for at least 2 years and do not foresee that you will be changing jobs any time soon, it may be a good time to buy a house!  Lenders like to see stability in their buyers!
• You plan to stay in the area for the long term!  If you are thinking you will be in the area for the next 5 years or so, it may be a good idea to buy a house rather than to keep renting!
• You are willing to make sacrifices to own your own home!  Owning a home may mean that you won't be able to take an overseas vacation each year, or that you will have to cut back on eating out, etc!  But if you are willing to make those kinds of sacrifices to buy a home, then now may be the right time to buy!
• Your mortgage payment will be less than the rent!  Rents are rising - interest rates have risen - home prices have risen!  But it is still possible to buy a home and have a mortgage payment that is less than the rent you would have to pay!
• You want to start building equity!  Every time you make a rental payment to your landlord, he is using that to build equity in the house or apartment he is renting to you!  If you want to build your own equity in your own house, then it is a sign that you are ready to buy a house!

NEEDS AND WANTS LIST!

Once you've determined that now is the right time, it's essential to know what you want in a home. I recommend creating a "Needs and Wants" list. Sit down with your family and identify the must-haves in a house, as well as the nice-to-haves that aren't deal-breakers. Consider factors like the number of bedrooms and bathrooms, the size of the home, and the location (city, rural, suburbs, or an HOA community). Also, think about the type of home, such as a townhome, condo, or single-family home. Don't forget to factor in schools, commute time to work, and other important aspects. Creating this list will serve as a fantastic starting point for your home search. It's crucial to have a clear understanding of your preferences before diving into online listings. By doing so, you'll be better equipped to narrow down your options and focus on properties that align with your needs and wants.  Having the Needs and Wants List with you when you are looking at houses is a great help to ---

• Prevent you from emotional buying!
• Eliminate homes that are a bad fit!
• Find the best house for your needs!
• Make appropriate compromises!
• Act quickly when the right house comes along!

When you are coming up with the Needs and Wants List, there will be certain things you will want to make sure you have in the house you buy:  a roof that is no leaking, plumbing and electrical systems in working order, heating system that works! You may want to also include things like safety and accessibility as well! Unless you are buying a fixer upper, these things are absolutely MUST HAVES!

But once you go beyond that then you have to decide on those things that you absolutely have to have in a home - YOUR NEEDS - the location, particular schools, number of bedrooms, commute time to work, amenities, etc.

After that, make a list of those things that would be nice to have but aren't deal killers - YOUR WANTS - things like amenities (a pool, patio, fenced yard, type of lot) and the aesthetics (type of flooring, paint colors, etc).

Remember, the market can be competitive, so be prepared with a thick skin and readiness to make the leap when the right opportunity comes along.

If you are thinking of buying a house and want to chat, let me know and we can meet for a cup of coffee and talk!