You've been driving around for months, your eyes drawn to every "For Sale" sign. You obsessively check the online realty listings every morning when you wake up and every night before you go to sleep. You think you might be ready to finally take the plunge, but where to start, and when?
First time home buyers can get lost in a tornado of questions, and today we'll address timing and some of the factors that go into calculating when you should buy a home.
Playing the Market
Like most transactions, home sales are heavily influenced by supply and demand - market factors. When there is a glut of available houses and supply outpaces demand, then it is considered a buyer's market. When there is more demand and competition is high, then you have a seller's market.
Interest rates are another major market factor that can impact your decision to buy a home, since even a few tenths of a percentage point in interest can add thousands of dollars to the cost of your home when spread out across a standard thirty-year mortgage.
While interest rates can never be predicted with 100% accuracy, many organizations analyze the market and make regular forecasts regarding the movement of interest rates. Do your homework by comparing the projections of sources you trust.
It's also important to determine whether or not your community is experiencing a real estate bubble. Analyze the historical trends for home prices in your chosen neighborhood over time. If prices are climbing at a faster-than-normal rate, then you may want to wait for the bubble to burst. No one wants to be stuck with a mortgage that exceeds a home's actual value.
Let's Get Personal
The market is out of your control, but it is certainly your duty to educate yourself about it as much as possible. Personal factors play just as big a part in the decision of whether or not it's the right time to buy a house.
First, you must take a close look at your income. Do you have a down-payment ready, or have you applied for a program that lowers your down-payment? Your home will require more than a monthly mortgage, and amassing the cash reserve to put the necessary money down is a large hurdle that many must overcome on the way to home ownership.
Once you move on to considering the mortgage payment, ask, will the cost exceed more than 30% of your monthly take-home? This is a threshold most financial advisors agree can not be crossed.
When considering your income and your readiness to buy a home, you must also analyze the stability of your income source or sources. Is your job secure? Are you likely to be transferred to another location in the near future.
You want your finances to be as steady and secure as possible before initiating the purchase of any property.
It's the Time of the Season
Spring and summer usually see a spike in the supply of houses for sale. You might think this translates to lower prices, but that is wrong! This is because the demand also increases, as people emerge from winter hibernation and get out and about looking for property. Spring and summer are a great time if you're looking for the greatest variety of houses to choose from, but be prepared to make competitive bids for the most desirable homes.
In winter and fall the market slows down and the available homes tend to be fewer and farther between, so you are much more likely to find a great deal. Remember though, a great deal is only worthwhile if it's for the house you really want.
You can try to time the market, but this is tricky and best navigated with the guidance of an experienced realtor who understands the local landscape. Jessica & Sarah are the Iowa realty experts best suited to find you the right house at the right price. Contact us today to ease on down the road to home ownership.