Is now a good time to buy a house?
Its an evergreen question and its a highly personal question.
And, right now, those indicators are blinking red.
As of August 2024, consumer confidence is quite low according to Fannie MaesHome Purchase Sentiment Index.
But do those attitudes accurately reflect the market?
Is Now a Good Time to Buy a House?
Prices began to rise again throughout 2023, but at a slower rate than during the pandemic.
Some sellers expectations have been slow to adjust.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Ask one of these companies to help… That was happening in 2021 and the first half of 2022.
That fortunately has stopped for the most part.
On top of that, fixed 30-year mortgage interest rates arehovering around 6.5%.
You just need to be prepared to take on that financial burden.
Here are some things to consider before making that purchase.
How Long Do You Expect to Stay in This Home?
Do you expect to get married?
Do you plan on having kids in the next five to 10 years?
How permanent is your current job situation?
Do you want to be in that location long-term?
If any of those situations are in flux, you might want to pause onbuying a homeright now.
That two-bedroom condo might get a little tight once you start having kids.
The best time to buy a house is when your life is fairly stable, both personally and professionally.
That doesnt mean you better have everything perfectly set.
How Much of a Down Payment Can You Make?
The current median sales price for an existing home in the U.S. is around $384,000.
That means to avoid PMI, a buyer would need to make a $76,800 down payment.
For most buyers, that will require planning and some aggressive savings before making the purchase.
The more you put down, the less your mortgage will be meaning lower monthly payments.
So you would borrow $307,200 (80%) instead of a higher amount.
First-time homebuyerstypically have more options with lower down payments and credit score minimums.
What About Your Credit Score?
double-check you know yourcredit scorewell before you begin the process of buying a home.
That one little number will greatly affect your loan options when it comes time to sign the mortgage.
The standard magic number required for conventional loans is 620.
Anything between 650 and 699 is considered fair.
Between 700 and 749 is considered good.
And anything 750+ means you have excellent credit.
The better your credit score, the better your loan options and interest rates will be.
Non-conventional loans will require higher credit scores.
One example is a jumbo loan, which typically requires a credit score of around 700.
There are ways to buy a house with alower credit scorethough.
Is Your Budget Ready?
Theaverage mortgage paymentin America is $2,188.
But if only that was all you were expected to pay.
Its easy to forget all the other fees that get tacked on to mortgage payments.
Lets use an example.
As of early 2023, the average cost of a home in Nashville was $461,000.
Well also assume that you could manage a 10% down payment on a 30-year mortgage.
Lets initiate the numbers.
The question is, prospective Nashville homeowner, do you have $3,468 of flexibility in your current budget?
(Keep in mind that youll have to pay for maintenance and repairs on top of that.)
If not, right now is probably not the best time to buy a house.
Home appreciation has risen so much that it is very difficult for first-time buyers to compete.
A lot of first-time buyers have been pushed out of the market with the higher rates.
(A Midwestern state might evenpay you to movethere.)
Property taxes and HOA fees can also vary greatly based on where you live.
In 2024,interest rateson a 30-year mortgage are averaging about 6.5%.
In 2015, they hovered between 3% and 4%.
And at the beginning of 2021, they were as low as 2.7%.
Interest rates had been abnormally low for many years.
History shows us that they are now at a level thats more normal, Thompson says.
If they could stabilize around 5%, that would be great.
So… Is It a Good Time to Buy a House?
Were definitely in asellers marketright now.
Most buyers right now arent comfortable as home values and interest rates are so high.
But your situation may be different.
Home prices are always changing.
Interest rates are always adjusting.
What well see this time next year could be drastically different from what were seeing now.
Know your credit score.
Robert Bruce is a senior staff writer at The Penny Hoarder covering earning, saving and managing money.
He has written about personal finance for more than a decade.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…