If I tell you that now is the right time to buy a new home, will you buy now? We all know the answer is no, or a polite, ‘heck no’. But the truth is, the best time to buy a house depends on your individual circumstances and goals. I wasn’t particularly interested in becoming a home owner to begin with, but that changed after the birth of my daughter. I wanted her to grow up in a familiar and safe neighborhood and develop a sense of belonging to a certain geographical location that she can call ‘home’. My reason might not resonate with everyone, but it was my deciding point to invest in a house and make it a home. My husband, on the other hand, looked at it from an investment perspective.
According to data on first-time homebuyers from the 2015 National Association of Realtors Profile of Home Buyers and Sellers, the median age for first-time homebuyers has remained virtually unchanged for the past 40 years: In 2015 it was 31 years old, compared with 30.6 in 1970-74.
Generally speaking, the best approach to buying a new home is when you can afford it and when you feel confident and comfortable with the idea of increased responsibilities and taking ownership of the commitments. Your decision will also be influenced by several of the following factors. So it is a good idea to evaluate where you stand with each of these aspects.
In most cases, purchasing a new home is a long-term decision. It is important to determine whether you will be comfortable in the home and neighborhood you choose. Managing mortgage payments, home insurance, property taxes, utilities, and other ongoing home maintenance requires a lot of commitment. If you are confident that you are ready to take on these responsibilities, you can take the plunge.
Ideally, you want to take advantage of lower interest rates to reduce your monthly payment and the amount you will pay over the lifetime of your loan. Current market conditions, your lender, the type of loan, your credit score, are some other factors that influence the interest you pay on your home loan. It is common knowledge that people with strong credit scores often secure lower interest rates.
|Credit Score||Interest Rate||Monthly Payment||Total Interest Paid|
Source: MyFico.com Loan Savings Calculator; based on $100,000; 30-year fixed-rate-mortgage.
New Home prices
When there are more homes for sale than buyers to purchase them, it signifies that it’s a good time to buy a new home. Sellers in these markets often offer competitive pricing to attract buyers, which means you may be able to secure more home for your money. This also means there are more homes on the market to choose from. Two years ago, over one million homes were sold in the U.S. alone:
- 5,250,000 existing homes were sold in 2015, according to data from the National Association of REALTORS®.
- 510,000 newly constructed homes were sold in 2015, according to the U.S. Census Bureau.
Down payment and closing costs
If you have saved enough in anticipation of your big purchase, you are at an advantage since a larger down payment typically results in lower monthly payments. If your down payment is lower than 20%, your lender may require you to purchase private mortgage insurance (PMI), or pay other types of insurance or fees. Most lenders will also expect you to cover closing costs, which may be equivalent to about 3% to 5% of your loan amount, which can be negotiated in some areas. Your real estate agent will help you estimate these costs.
Typically, there are more homes for sale during the spring and summer months, when the weather is nice and children are out of school. Shopping during these seasons will likely give you a broader selection to choose from.
Lawrence Yun, National Association of REALTORS® chief economist, says existing sales roared back in March and were led by hefty gains in the Northeast and Midwest. “The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month,” he said. “Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does.”
Overall, it can be hard to pinpoint the ‘perfect’ time to buy a new home. But by creating a comprehensive financial plan that takes your individual goals into account, you’ll be able to reach this personal milestone at a time that’s right for you. Whatever your goals and commitments are, organizing your life and your finances play a major role in how you execute your plans. With the help of tools like a simple dashboard offered for free by InsuredMine, you can start organizing your multiple insurances and create a comprehensive financial plan.
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