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Is It a Good Time to Buy a House?

Save more, spend smarter, and make your money go further

Real estate is one way to invest your money, but knowing when to buy a house is important. High interest rates and other factors can make it less beneficial to buy at certain times. The truth is, there are factors you need to consider outside of the housing market if you’re looking for the best time to buy a house.

There are a lot of things to do before buying a home, but making sure the timing is right can be crucial. So, is it a good time to buy a house? Here’s what you need to know.

Is It a Good Time to Buy a House?

When asking whether it’s the best time to buy a house, there’s a lot to consider. You’ll have to analyze the current housing market, economic conditions, and your own financial situation to determine whether buying a house makes sense for you right now.

The Best Time to Buy a House

Like many major purchases, buying and selling real estate is more popular during certain times of the year. The real estate market tends to heat up as the weather does, with the months leading into summer being some of the busiest months in real estate. According to a 2016 housing market analysis conducted by Zillow, the months April, May, and June saw the highest number of new listings.

Just because there are more new listings during April, May, and June doesn’t mean you should exclusively shop for a home during these months. You never know when you’re going to find a listing that perfectly suits your needs, so it’s a good idea to check listings regularly to make sure you’re not missing anything. 

Just keep in mind that April, May, and June are the hottest months in terms of real estate, so you may have more listings to choose from in the late spring.

Things to Consider Before Buying a House

As simple as it may seem to secure a conventional mortgage loan and buy a house, there are a lot of things to think about first. You want to make sure you’re buying a house at the right time, and that means looking at the housing market, interest rates, and your financial situation. 

Here are some of the things you may want to think about before you buy a house:

Interest rates

Mortgage interest rates change every day, and even a small change in your interest rate can have a major impact on how much you pay for your house. Even an increase of one-tenth of a percent (0.1%) can potentially cause you to pay thousands (or tens of thousands) more than you would have paid with a lower mortgage interest rate.

In some cases, mortgage interest rates may change multiple times over the course of a single day. It may feel like you’re stuck with the interest rate you’re offered, but there could be more flexibility if you’re willing to wait to lock in a good interest rate. You can talk to your mortgage lender to learn more about mortgage interest rates and how high interest rates affect the overall price of a home.

While you’re using our savings calculator to save up money to buy a home, you can also look at changes in mortgage interest rates and take your time to make sure you lock in a low interest rate that makes your home more affordable.

Housing market conditions

The condition of the housing market is another important factor to consider if you’re trying to figure out the best time to buy a house. The housing market changes all the time, and there are many socio-economic factors that can have an effect on the market. Most importantly, you should consider the average value of a home in your area and how that value has changed.

When there are more people buying than selling, the average value of homes tends to increase. You might have been able to afford a home several months ago, but that same home might be out of your budget if house prices have increased. 

Housing prices may also rise with inflation, which leads to a gradual increase in prices over time.

The good news is that the housing market isn’t set in stone. Changes in the market could lead to more affordable home prices, so finding a home that fits your budget may simply be a matter of waiting it out in some cases. 

That being said, historically, average home prices do tend to increase gradually over time. 

Economic conditions

When you’re making a major financial decision, it’s always a good idea to look at the economy as a whole before you make the final call. There are times when economic conditions may make it difficult to save for a down payment or make your mortgage payment on time each month.

Buying a home during a recession—or when we’re nearing a recession—can make the whole process significantly more difficult. That being said, you could potentially find more affordable houses during a recession since real estate prices tend to be lower. 

It’s all about striking a balance and finding the right time to buy based on your situation.

If you do buy a home during a period of economic downturn, keep in mind that your investment is far from guaranteed. The state of the economy tends to affect real estate prices, so your home could potentially decrease in value if the economy continues to suffer.

Job security

It’s important to remember that you’re signing up to make 30 years of payments when you’re agreeing to a traditional mortgage. You might feel confident in your ability to pay your mortgage on time now, but a lot can change over the course of several years. This is why job security is a priority for many people when planning to buy a home.

As a general rule, it’s said that buyers shouldn’t spend more than a third of their gross monthly income on the home they buy, which includes their monthly mortgage payment (principal and interest) as well as taxes and insurance. If you’re planning on buying a home, you may want to make sure you have enough steady income to make your mortgage payments each month.

If you’re a freelancer or you work in an industry where work isn’t always stable, you might want to consider saving a little extra before you buy a home. Making your monthly mortgage payment on time is crucial.

Longevity of your stay

Another thing you might want to consider before you buy a home is how long you’re planning on staying there. Buying a home can be a great way to put down roots in an area where you’re planning on living for several years, but what if you want to move in a couple of years?

If you’re not planning on staying in the area for long, you might want to think about the benefits of buying vs. renting a home. While buying a home allows you to build equity over time, buying might not be the best option for you if you plan on moving soon. 

Alternatively, you might consider buying a home, living there for a couple of years, then renting it out to pay your mortgage. If you plan on converting your primary residence to a rental property, you’ll need to make sure your loan can be used for a rental and obtain landlord liability insurance.

How to Prepare for Buying a House

When you’re buying a home for the first time, the process of saving up and buying a home may seem overwhelming. From getting pre-approved for a mortgage to making sure the timing is right, you have a lot on your plate as a home buyer. 

So, is it a good time to buy a house? And what can you do to get prepared as a homebuyer? Check out our tips below. 

Pay off debts

The first thing you may want to do if you’re thinking about buying a house is to make sure you’ve paid off all of your debts. It’s usually not ideal to be making monthly payments toward any debt while you’re paying off your mortgage, especially if you want a little breathing room financially.

Before you start saving for a down payment or shopping around for homes, consider whether you’ve paid off all your credit cards. If you have any outstanding medical bills, car loans, or other debt to pay off, you may also want to address those as well. This gives you a fresh starting point and makes it easier to budget for your new home.

If you have a lot of debt, you might consider a debt consolidation loan. These loans combine several sources of debt into one line of credit, which makes your debt easier to manage. Plus, debt consolidation loans may allow you to lower the interest rates on debt you haven’t paid off.

Save for a down payment

Once you’ve paid off all your debt, it’s time to start saving. Buying a home isn’t cheap—make sure you have enough money saved for a down payment, which is typically a minimum of 3.5% of the total value of the home you’re purchasing. 

If you don’t want to pay for private mortgage insurance each month, you’ll usually need to put at least 20% down. Putting 20% can be quite significant. For example, if the house costs $500,000, you would need to put down $100,000.

You can talk to a mortgage lender to learn more about how much you need to save for a down payment.

Keep in mind that it’s a good idea to save even more than you need for your down payment because there are other costs associated with buying a home. In addition to closing costs and inspection and appraisal fees, you’ll also need to spend money to move. You might even need to purchase new furniture and other things for your home, so saving a little extra money is never a bad idea.

Build up your credit score

To secure a mortgage with a low interest rate and favorable terms, borrowers typically need to have a good credit score. Your credit score gives lenders an idea of how trustworthy you are as a borrower. 

In general, a high credit score means less risk for lenders, which is typically rewarded with a lower interest rate and better loan terms. And, in order to qualify for most types of mortgages, you need a credit score of at least 620. 

Building your credit score might seem difficult, but it’s actually a pretty simple process. You can start by getting a credit card if you don’t have one, or you can take out a loan to make a purchase. When you make on-time payments and keep your credit utilization low, credit scores typically go up. Credit scores may also improve as you build a longer credit history, so you may want to consider keeping older credit cards active.

If you need help building up your credit score to buy a home, there are several free credit monitoring services available. These services help you keep an eye on your credit score and give you insight into how to improve it.

Consider your future lifestyle

When preparing to buy a home, don’t just consider what your lifestyle and needs are like at the current moment. Make sure to look ahead and consider what your life might look like in the future. 

Do you expect to be earning more money in five years? Are you planning on starting a family? Will you retire soon? These factors can all impact your decisions when it comes to buying a home, so focus on houses that can accommodate both your current and future needs. 

Create a budget

Once your credit score is high enough that you can qualify for a good mortgage, you may want to confirm that you have enough wiggle room in your monthly budget to buy a home. 

As we touched on earlier, it’s generally a rule of thumb to not spend more than one-third of your gross monthly income on mortgage expenses, which includes your mortgage insurance and property taxes.

Try to be realistic when it comes to your budget. You might be able to afford a more expensive home if you cut back significantly on your food and entertainment bills, but you want to create a budget you can sustain. There’s nothing wrong with cutting back a bit so you can afford to buy a home, but drastically changing your lifestyle can be difficult to maintain for a long period of time.

Explore mortgage options

Now that you’ve got the basics figured out, you can start looking at your mortgage options. There are different types of mortgages available for different types of home buyers, and you may even qualify for special mortgage terms if you’re a first-time home buyer.

First-time home buyer programs can make it easier (and more affordable) to buy your first home. For example, first-time buyers can secure an FHA loan and pay as little as 3.5% down. Not only do these loans require smaller down payments, but they’re also easier to secure in most cases.

It’s also a good idea to shop around a bit to make sure you’re getting a good interest rate and favorable mortgage terms. With all the resources that are available online, it’s easy to compare mortgages from different lenders. You may want to spend more time shopping around and comparing mortgages, so you can confirm you’ve found a good rate.

Find a trustworthy realtor

You’re going to be spending a lot of time with your realtor when you’re looking at houses and making offers, so finding a good realtor is essential. You want a realtor who has experience buying and selling homes in your price range, so looking at reviews and testimonies can be a good place to start. You can also ask for a recommendation from your mortgage lender or talk to friends and coworkers about realtors they’ve worked with.

At the end of the day, it’s important that you get along with your realtor and trust their judgment. In addition to looking at reviews and asking around to get recommendations from others, you can always meet with a few realtors to chat about your situation. Your realtor is going to play a big role in the home buying process, so make sure you take your time to find a realtor you like and trust.

Get pre-approved

Once you’ve got all your ducks in a row in terms of preparing to buy a home, it’s time to get pre-approved for a mortgage loan. Getting pre-approved gives you a general idea of how much you can spend on a home, which you need to know when you’re shopping around. Pre-approval also typically makes it easier to make an offer and close on a home when the time comes.

Pre-approval often hinges on your credit score and finances, so you may want to ensure those are in order before applying.

Once you’re pre-approved, you can start looking at listings in your area and talking to your real estate agent about viewing houses and making offers when you find something you like.

Final Notes

Buying your first home is no small task. Factors to consider before you jump into purchasing a house include interest rates, housing market conditions, and economic conditions. The “right time” to buy a home is different for everyone, so you may want to carefully consider your circumstances before you decide it’s time to buy.

With Mint, saving for a down payment and budgeting to buy a new home is made much easier. You can connect all your financial accounts to Mint to track your spending, plus you can keep track of your investments and create a budget right inside the app. If you’re beginning your journey as a prospective home buyer, get prepared with Mint today.

This is for informational purposes only and should not be construed as legal, investment, credit repair, debt management, or tax advice.  You should seek the assistance of a professional for tax and investment advice.

Third-party links are provided as a convenience and for informational purposes only. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.

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