Ready to Buy a Home? Factors to Consider Before Taking the Plunge

Buying a home, this is often one of the biggest financial decisions we make. Real Estate is likely the single most expensive thing that most Americans will purchase in their lifetime and home ownership is exciting. So how do we know when to buy a home and when to hold off? This is the question I have been working on in my own journey toward home ownership and this is the question we will be discussing in today’s coffee and cash video.

Let’s start off with when not to buy a home. It is generally recommended that potential home buyers pay off most other forms of debt before purchasing a home. Things like credit cards, car loans, and even student loans can be an increased burden once a mortgage is thrown into the picture.

Another important factor is the size of the potential buyers emergency fund? As a homeowner the are significantly more opportunities for large expenses to come up unexpectedly, in addition to have difficulties with a car there is all sorts of expensive items in and around a house that could break. Refrigerators, AC and Heat, bathrooms, and even the roof of a home could need expensive repairs or replacements. It is important to have an emergency fund of 3-6 months of living expenses so that when things go wrong, there is money to pay for emergencies without wracking up credit card debt.

Finally, it is important to factor in the upfront cost of a downpayment, and the monthly cost of a mortgage. First time homebuyers can often get away with putting only 5-10% down however if any less than 20% is put down for the down payment there is an additional cost of Private Mortgage Insurance which will add to the monthly mortgage cost. It is recommended the total monthly cost of a mortgage does not exceed 28% of monthly take home pay. It is no fun to be a new homeowner if your mortgage is too expensive causing excess stress on your monthly budget.

Alright, so with that out of the way when is a good time to buy a home? Well, the answer here is pretty simply. If you have satisfied the previous points, having paid off most other forms of debt, saved up an emergency fund of at least 3 – 6 months of living expenses in addition to the down payment for the property. And finally, it is important that you income can support the cost of your monthly mortgage. With all of those factors taken care of it may be a great time to buy a home. Interest rates have been higher this year than in recent

history but that is not necessarily a reason to wait to buy a home. If interest rates go down there will likely be more demand for houses which could cause prices to rise. Ultimately it is less about timing the housing market and more about making sure that you are ready for homeownership and the responsibilities that come along with it.

It can be easy to feel like there is a missed opportunity if waiting to long to buy a house, but it is more important to buy the right house at the right time than simply trying to get a good deal on a piece of property.

Thanks for watching this weeks episode and please reach out to us here at Simmons Capital Group with any follow up questions!