You’ve heard it a thousand and one times: interest rates are a huge determining factor when choosing the right time to buy a home. Lower rates equal lower monthly payments, which equate to a good time to buy. You’ve probably heard this a thousand times as well: interest rates are hitting historic lows, and might even get lower in the near future.
But here’s the thing: rates aren’t everything. If you only takes rates into consideration, you might find yourself waiting hopefully for them to drop even more, remaining forever uncertain if the time is now. Instead, carefully consider the rate while simultaneously thinking about the other factors that determine if now is the right time for you to buy a home.
Four other readiness factors:
1) Your Job Security
Do you have a secure career, one in which you’re fairly certain you’re likely to stay? A solid job history with good stability makes lenders much more eager to give you a mortgage, and should make you feel more certain that now is a good time to buy property. Alternatively, if you could be relocated in a year or two, you might want to wait.
2) Your Down Payment
If you are currently ready, willing, and able to put 20 percent down, then consider yourself ready for a mortgage. Of course, there are many people who can’t do this, and for them, there are FHA loans and Fannie- and Freddie-backed loans with down payments as low and 3.5 and 3 percent, respectively. In the case of FHA loans, you’ll have to pay private mortgage insurance (PMI), but if you’re financially prepared to pay this, then you’re probably ready to take on a home purchase.
3) Your Timeline
Remember this important factor: it takes the average homeowner four to seven years to break even on their purchase. But most plan on staying in a home at least that long, so it’s worth it. If you truly want to put down roots and plan on staying where you are, you’re certainly better off buying than renting. If, however, you might want to move quickly, now might not be the time to invest in home ownership.
4) Your financial stability
The number one rule is don’t buy more home than you can afford. Keep in mind that in addition to the down payment, you’ll have to pay homeowner’s insurance, closing fees, property taxes, and possibly home repairs. That being said, if you find a home that suits your wallet and your dreams, and you can afford to pay these associated fees and the monthly payments, then you’re ready to be a home owner.
When you look at homeownership from all angles and are smart about your investment, you’re much more apt to buy when you’re really ready.
If you’re buying or selling a home in the Boston area and are in need of a mortgage, or have any mortgage-related questions, contact me at anytime for help or advice.