To Buy or Not to Buy a House?

Does it Make Sense to Buy a House Right Now?

Ahhh, homeownership. It’s our way of claiming our central piece of the American Dream. Yes, owning a beautiful home is what most of us dream of, but how do we know when the timing is truly right to make that move? How do you determine if homeownership is a true priority at this time?

To answer these questions, let’s take a closer look at what it really costs to buy a home in today’s housing market and the steps you can take to be prepared.

First, let’s review a few questions you can ask yourself to ensure your homeownership goals align with your spending goals and core values. 

• Why is buying a home important to me?

• Are external factors (social class comparison, meeting others’ expectations, desire to improve social status) impacting my decision to buy?

• Would I be better financially prepared if I purchased a home one year from now?

• Am I fully knowledgeable of the financial responsibilities associated with homeownership?

Now that you’ve determined your true motive for purchasing a home, let’s jump into the topic at hand. Is it the right time?

When exploring the components of the home-buying process, you must consider your path to financial preparation and the current state of the market. 

We are currently in a seller’s market, which means there are more people who are interested in purchasing a home than there are available homes. This means the market is a bit more competitive for potential homebuyers. This does not mean that you won’t be able to find a home, it just means you’ll have to be more strategic in your approach to secure the home you want. 

Here are some tips for preparing to purchase your first home. 

1. Request a fresh copy of your credit report.

   It’s essential that you know the status of your credit report because this determines whether you will be approved for a loan, should you choose to borrow. (You can download your credit report for free here.) Know your credit score and what a strong score means. Monitor your credit score closely using resources like Credit Karma or FICO. When you review your credit report, check for the following harmful factors:
   - Duplicate or incorrect accounts
   - Fraudulent accounts
   - Inaccurate payment statuses
   - Outdated information
   

2. Pay down as much debt as you can before starting the homebuying process.

   Limit or cease credit card spending and familiarize yourself with the value of your assets. Doing so will give you an accurate picture of your net worth. This is what mortgage lenders will review extensively during your loan underwriting process.

3. Finalize your housing budget.

   Get crystal clear on what you can afford to pay each month. This is important to know so when you’re ready to make an offer on a house, you’ll be able to bid confidently without overextending yourself.
   

4.  Save up money for a down payment of approximately twenty percent.

   Although a down payment of this amount is not required, it is very beneficial to have a sizable down payment saved. Some benefits include:
   - A lower mortgage rate
   - A lower monthly payment
   - A higher offer acceptance rate from the seller (great in a seller’s market)
   - Avoiding private mortgage insurance (PMI)

   - Ensuring that you don’t over-leverage yourself by buying a way-too-expensive house

5. Be strategic with the time of purchase.

   Summertime is a popular time to buy or sell a home, so the market will be a lot more active. This gives you more homes to choose from, but it also means there is higher market demand. And we all know that demand drives prices. Consider purchasing your home in off-peak seasons to avoid the hustle and bustle and save a little money.
   

6. Get pre-approved by a mortgage lender.

   Pre-approval does not guarantee that you’ll get the loan, but it does lessen the occurrence of surprises concerning your credit or financial status. It also showcases your commitment to the seller, which is key in a seller’s market.

7. Plan for closing costs, home inspections, homeowner insurance, property taxes, moving costs, and home renovation costs.

   There’s a lot more to buying a home than buying a home. The associated fees can be quite expensive. So remember that initiating the process to save money with an attractive loan interest rate won’t extend to the rest of your anticipated fees.

8. Strategize with your real estate agent to determine the best offer terms.

   Your agent is your partner - your experienced and knowledgeable partner. Use their expertise to your advantage to craft a plan of making yourself the most attractive to the seller. This includes being flexible, accommodating, and a team player in your correspondence with the seller. Satisfied sellers may show their appreciation by paying your closing costs, throwing in furniture or appliances, or looking out for you in other financial ways.

Buying a home is an exciting, amazing, and enormous undertaking. By walking through these steps, we hope you clearly recognize what’s ahead of you. 

Next Steps

If you want customized help figuring out how to save for the house of your dreams, let’s chat! Schedule a call with Beyond Money, and let’s get started!