Are you a buyer overwhelmed with information when looking for the best time to buy a home? You aren’t alone. A quick search will provide advice on seasons, dates, and even days of the week that are potentially advantageous.
Then there’s the market to consider. Should buyers wait the market out to see if it becomes cheaper to buy a house next year?
Cristian deRitis, the deputy chair economist at Moody’s Analytics, offered the following advice: “I wouldn’t necessarily wait around and see if you can get the best possible deal because timing the housing market is very difficult.”
Forget trying to time the market. The best time to buy a home is now. There are no guarantees that the market will drop in 2024, especially if buyers are hoping for rates that scrape close to zero percent, similar to those experienced in the last decade.
“Returning to mortgage rates of 3% or 4% is not going to happen, in my view,” said Lawrence Yun, chief economist at the National Association of Realtors. Yun pointed out that historically rates have been higher. The low rates of 2020 and 2021 were “unique,” and those that got them were “lucky,” he said.
Moody’s Analytics predicts a 5% to 10% drop in home prices from their peak over the next 18 to 24 months, after which prices will rise again.
According to Roland Nairnsey, the president of New Home Sales Plus, the return of options during home purchasing is encouraging more buyers to purchase now.
“Our homeowners feel that now is an ideal time to invest in their brand-new home, Nairnsey said. “Unlike last year, they love that they can choose the home of their dreams, their favorite homesite, and then personalize their home at our state-of-the-art design studio. They also love that we include more quality features in our homes than ever and have limited-time incentives for moving forward this month.”
“Finally, they know that economic research shows we have a national housing shortage and low local inventory. With all of this in mind, wouldn’t you agree that now could be the ideal time to invest in the home of your dreams?”
Factors to consider on the best time to buy a house
Market considerations aside, buyers must consider their circumstances when deciding the best time to buy a home.
How’s your debt?
Buyers should think about what they owe and the category of debt. For example, if they are mired in high-interest credit card payments, it makes sense to tackle those first and improve their credit score before approaching a lender to buy a home.
On the other hand, if a buyer is on the last few payments of a low-interest student loan and is on their way to becoming debt free, it may be the perfect time to think about investing in a home.
Any money that isn’t going towards paying debt can then be used as funds for a down payment.
The condition of your credit score
If a buyer has established credit in good shape (meaning little debt and no missed or late payments), they will get a better rate from the lender. Most mortgages will require a minimum of 620 to qualify. Don’t forget to check your credit score and obtain your credit report to ensure no mistakes need resolution.
Having the money for a down payment
Contrary to popular opinion, a 20% down payment is not required to purchase a property. As little as 3% down on a conventional loan or 3.5% down on a Federal Housing Administration (FHA) loan can now be used to purchase a home. Even without making any down payment, you might be able to be approved for a loan from the Department of Veterans Affairs (VA) or the United States Department of Agriculture (USDA).
You’ll discover that bringing a more significant down payment to the closing table usually works to your advantage. You can avoid paying for private mortgage insurance with a 20% down payment (PMI). In the event of a loan default, PMI will defend your lender. If you don’t make a 20% down payment on your loan, most lenders demand that you pay PMI.
A substantial down payment can help you save thousands of dollars in insurance premiums over time. If you have saved money, it could be time to make a down payment.
Are you ready for all the expenses?
The real price of housing is much more than your monthly payment. Other expenses related to property ownership include:
Insurance: Unlike auto insurance, having homeowners’ insurance when you own a home is not required by law. But, as a condition of your loan, mortgage lenders demand you to carry sufficient insurance. A little over $100 per month is what the typical homeowner pays for home insurance.
Regardless of the location, a homebuyer must pay property taxes. In addition, local governments receive funding from property taxes to support local services. Public schools, fire departments, and libraries are just some services that depend on property taxes for funding.
Municipal governments determine property taxes as a proportion of the price of your house. Therefore, you will pay more the more your home is valued.
Closing fees are a one-time fee you must pay to finalize your loan. Title insurance, legal fees, lender fees, and other expenses might be included in your closing costs. Closing expenses typically range from 3 to 6% of the loan amount.
Utilities: If you rent an apartment or a house, your landlord may pay some of your utility expenses. When you own a home, you must ensure you can handle water, power, trash collection, and sewage each month.
If you own your home, you are solely responsible for the repairs. Therefore, ensure you can pay for regular maintenance and necessary repairs or replacements, such as roofing, windows, and garage doors. Remember that maintaining an older property can consume a sizable portion of your monthly budget. In addition, certain communities have additional fees, such as for trash collection.
The best time to buy a home is now
If a buyer has financial stability and regular income, deciding to buy a home now makes the most sense. Unfortunately, timing the market has proven difficult, especially recently. So, research the areas that appeal to you and find a real estate agent willing to hustle to get you the best deal possible. Bypass the drama and predictions and buy that new home this year.