Should I Buy A House Right Now?


If you’re wondering whether it’s a good time to buy a house, ask this instead: Is it a good time in MY life to buy a house?
Current economic indicators and the state of your local housing market give important context for your decision. But whether this is a good time for you to buy a house also depends on your financial situation, life goals and readiness to become a homeowner.
Here’s what to consider.

The market outlook for home buyers
These are some of the factors affecting buyers in today’s market.

Higher mortgage rates
Economists forecast that mortgage rates will go up this year, after hovering at historically low levels in 2021. That’s not what you want to hear as a buyer because lower rates make home loans more affordable.
But it’s important to keep rising rates in perspective. Most forecasters predict the average 30-year fixed rate to stay below 4% in 2022. In the last five years, the average peaked at almost 5% in 2018, and from 1971 to 2017, the average rate peaked at over 18% in the fall of 1981, according to Freddie Mac.

Competition among buyers
Demand for homes is high, but inventory is low, making this a seller’s market across the country. A seller’s market happens when there are more prospective buyers than homes for sale.
The stiff competition for homes means fewer choices, higher prices and quicker sales. Most homes sold in the last year were on the market for less than a month, according to data from the National Association of Realtors.

Higher home prices
Home prices are going up, but forecasters predict they’ll rise at a slower pace this year than in 2021. The median existing home price was $358,000 in December 2021, up 15.8% from the same month in 2020, according to the NAR. Existing homes are properties that were occupied before they went on the market.
Median home prices are expected to increase by 5.7% year over year in 2022, according to a survey of 20 housing and economic experts by the NAR.

Tight credit requirements
Although credit requirements to get a mortgage have loosened a bit in the last couple of months, lender requirements are still relatively strict. Mortgage credit availability was 30% lower in December 2021 than prior to the coronavirus pandemic, according to the Mortgage Bankers Association. That means it may be harder to qualify for a mortgage with a lower credit score.
Your readiness to buy a home
Ask yourself these questions to explore whether you’re ready to buy a home.

Prepared to put down roots?
Think about your life goals, relationships and interests. How long can you see yourself living in this location?
Ideally, you’d want to remain in the home long enough for rising property values and your equity to exceed the costs of buying and selling, including real estate commissions and mortgage closing costs. That will typically take a number of years.
You could also be subject to capital gains taxes if the home appreciates in value and you sell it after less than two years.

How’s your job security?
A mortgage is a big commitment and can become a stressful burden after a job loss, so it’s not a good time to buy a home if you think you’ll get laid off. Wait until your employment is stable before thinking about buying a house.

You’ll need money for a down payment and mortgage closing costs, and for moving and other expenses after you buy the home. The down payment requirements vary by the type of mortgage and the lender. The more you put down, the lower your monthly mortgage payment. For FHA, the down payment can be as low as 3.5% plus additional closing costs, inspections, and appraisals. Conventional loans will usually require 20% down, while VA loans can be done with 0 down, plus additional closing costs.

Lenders generally offer the best mortgage rates and terms to borrowers with credit scores of 740 and above, although you can qualify for a mortgage with a score in the 600s. In recent months, about 6% of purchase mortgages were for borrowers with FICO credit scores of 600 to 649, and 16% to 17% were for borrowers with credit scores of 650 to 699, according to mortgage data provider ICE Mortgage Technology.

The options are much slimmer with a score in the 500s. A fraction of 1% of all purchase loans were for borrowers with a FICO score of 500 to 599. If your credit is marginal, it might make sense to postpone buying a house and use the time to work on building your credit. The average FICO credit score for all closed mortgage loans in recent months ranged from 737 to 741, according to ICE Mortgage Technology.

Lenders look at your debt-to-income ratio, or DTI, to help determine whether you qualify for a mortgage. Your DTI is the percentage of your monthly gross income that goes toward monthly debt payments, including housing costs, as well as car, student loan, credit card and other debt obligations. Lenders like to see a DTI under 36%. The lower your DTI, the better your chances of qualifying for a mortgage.

for more info visit: https://www.nerdwallet.com/article/mortgages/is-it-a-good-time-to-buy-a-house

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