When Is the Right Time for You to Buy a House?

Ultimately, the right time to buy a house depends on your finances, goals, and personal timeline. The real estate market has its own patterns and idiosyncrasies, but they aren’t definitive. You’ll want all of your ducks in a row before you get to the offer stage on a home purchase.

Before you start the home-buying process, you should work to get your finances in order. You can’t control what direction mortgage rates are headed, or the housing market, but you can take steps to set yourself up for a successful home-buying experience.

If you take the time to save for a down payment and closing costs and work to improve your credit score, you’ll make the entire process much easier. Having a higher FICO score and more cash in the bank makes it much easier to qualify for a loan. But that’s not the only benefit. Lenders offer the lowest interest rates to those with the highest credit scores.

Also, bringing a bigger down payment to the table can help you save money by lowering your loan-to-value (LTV) ratio. Your LTV is calculated by comparing the value of the mortgage to the value of the property. So an $80,000 loan on a $100,000 home would have an LTV of 80%. Having a lower LTV can qualify you for better mortgage rates, and if your LTV is lower than 80%, you won’t need to pay for private mortgage insurance (PMI) on conventional loans. On average, PMI costs up to 1% of the total loan value annually. So if you’ve got a bigger loan, you could save hundreds of dollars a month by not having to pay it.

A shrinking of the housing supply would normally create a seller’s market, where the number of buyers outpaces the supply of homes and prices increase. But in most markets, this hasn’t happened. In fact, home purchases are up because of historically low mortgage rates. Being able to lock in low rates can save you thousands of dollars over the life of your mortgage. There are opportunities out there if you have a solid credit profile and a secure job to qualify for a loan.

But you may have to pay more for a home. The interest rate decrease led to a flood of new buyers on the market — but the supply of homes didn’t increase proportionately. This means you may be facing fierce competition depending on the local market. A home that would’ve been straightforward to purchase a year ago may now be inundated with bids, so you may have to act fast.

However, lending standards have become more stringent. The requirements aren’t as steep as they were in spring 2020, at the beginning of the pandemic, but some lenders are still picky because of high unemployment rates.

If you have a secure financial situation, you may want to take advantage of historically low mortgage rates. Even then, you shouldn’t feel rushed, as there’s no indication that rates will be going up soon.