The prospect of buying a home is exciting, and many families see purchasing a home as one of life’s most celebratory moments. After all, homeownership comes with several benefits, including mortgage interest deductions on taxes and equity built over time in the property.
A house is also one of the most significant purchases you’ll make in your life, and a hasty decision can impact your personal life and financial health for years. By considering all facets of the housing market and your current situation, you can make an informed home purchasing decision.
Use this guide to help you decide when to buy a house!
What Is the Best Time of Year to Buy a House?
Like in many seasonal businesses, supply and demand in the housing market shift along with the seasons. Warmer weather generally brings more listings and interested buyers, while colder weather offers sparse listings at discounted prices. Ultimately, the best time to buy a house depends on your priorities.
Here’s what to expect from the home-buying experience throughout the year:
Spring
During the spring, houses pop up on the market like wildflowers. The springtime offers the most listings of any other time of year, especially in April. While you can enjoy a wide variety of houses to choose from, you will also be competing with many other homebuyers. Eager buyers quickly snatch up houses during the spring, so it’s essential to prepare your mortgage application in advance so you can move quickly if you find your dream home.
Summer
The listings from the spring tend to carry over into summer, maintaining a high number of listings and only a slightly reduced amount of competition among buyers. If you find the perfect home at a reasonable price during the summer, you should snatch it up while you can.
Fall
The fall is usually the best time of year to get a mortgage and buy a house. Though listings are less abundant than in the warmer months, there are typically still many quality listings available. Additionally, the market tends to slow down as the weather cools, so sellers are usually more eager to sell their homes for reduced prices.
September is generally the best month to buy a house because prices start to drop at the beginning of the month. Try to take advantage of the low prices before other buyers purchase the best houses first.
Winter
The winter brings a lull in the housing market, with fewer listings available than any other time of the year. While you will have fewer houses to choose from than in the warmer months, you can benefit from low prices and less competition. If you stumble across the right home during the winter, you may enjoy one of the most relaxed and budget-friendly purchasing experiences possible.
Are You Ready to Buy a Home?
Although the prospect of homeownership is exciting and includes many benefits, your life circumstances can influence your decision. After all, purchasing a home is a big decision, and a mortgage will lock you into a location and a sizeable loan for at least several years. Before deciding to buy a home, you should carefully review all of your finances, family goals, career aspirations and more.
When should you buy a house? Consider these aspects of your personal life to help decide when you’re ready to buy a house:
Down Payment
The required down payment for a home depends on the type of loan, your credit score and the lender’s policies. In general, the higher your credit score, the lower the down payment you’ll need.
Lenders usually calculate down payments based on a percentage of the total price, with the standard recommended amount as at least 20% of the value. A sizeable down payment increases your chances of a reasonable mortgage rate with the added benefit of avoiding mortgage insurance.
If a large down payment would be difficult for your current situation, several options can reduce or eliminate a down payment. Here are a few types of available loans, listed by minimum down payment amounts required:
- VA loans: For qualified U.S. veterans, active-duty military personnel and military spouses, a VA loan backed by the Department of Veterans Affairs allows them to purchase a home with no down payment required.
- USDA loans: Those looking to buy a home in a rural area can use a loan backed by the U.S. Department of Agriculture to fund a new home purchase with no down payment and low-interest rates.
- FHA loans: Backed by the Federal Housing Administration, FHA loans allow people with little or poor credit history to acquire loans to purchase a house. FHA loans can require as little as a 3.5% down payment as long as you meet the requirements.
Debt-to-Income Ratio
Lenders use your debt-to-income (DTI) ratio to determine whether you can afford your monthly mortgage payments. Your DTI is the percentage of your monthly income you use to repay debts plus any housing expenses. The standard DTI ratio the FHA uses is 43%, though other lenders may be more or less strict. Regardless of the lender’s policies, you should ensure you earn enough monthly income to pay for all expenses consistently before purchasing a home.
Credit Score
Your credit score impacts how likely you are to qualify for a loan, and the better your score, the more likely you are to get a low-interest rate. Many factors affect your credit score, including your payment history, the amount of credit utilized and recent credit inquiries. Building credit can take a long time, especially if you are just starting or have a history of late payments on credit card bills. Here are some steps to start improving your credit for a mortgage:
- Pay all credit card and loan bills on time every month: Delinquent accounts remain on your credit report for seven years and can severely impact your credit.
- Keep existing credit accounts open: It may be tempting to close a credit line immediately after paying it off. However, doing so can indirectly damage your credit. The total amount of credit available affects a large portion of your credit score, so it’s a good idea to keep a credit card even if you have no intention of using it.
- Avoid hard inquiries before applying: While hard credit inquiries, like credit pulls when applying for a new credit card, only impact a small part of your credit, the shift can still be enough to make the difference between a good interest rate and a great one. Hard inquiries remain on your credit report for two years, so avoid applying for another card or loan before applying for your mortgage.
Long-Term Plans
After you’ve determined whether buying a new home is financially feasible, you should consider how long you plan to stay there. The choice is simple if you have a stable career and already know you love the area. However, the decision can be complicated if you frequently travel for work or are planning to relocate.
If you think you might want to move within a few years and still want to buy a house, consider purchasing one priced lower than the maximum amount you can afford. That way, if you do decide to relocate, the mortgage will be manageable even if you have trouble selling the house immediately.
Fund Your Dream Home With CIS Home Loans
Once you’re ready to buy, the first step is to find a mortgage company that can simplify the purchasing process. At CIS Home Loans, we’re dedicated to providing quality service with a personal, small-town outlook. Our friendly staff will help you find the right mortgage for your situation so you can focus on cultivating the joy of homeownership.
If you want information on mortgage loans or have any questions, please contact us at 800-844-4845. Once you’re ready to buy, apply for a home loan online. Your dream home is waiting!
