House hunting can go one of two ways, you could be lucky and find your dream home right away or it could take you months of searching to find something you’re willing to spend your hard-earned and hard saved money on.
Deciding if now is the right time to buy a house becomes even hard when you feel like you have to take everything that could go wrong or right into account…
So when is it the right time to buy a house? When you want to buy a house AND have the money, this is the short answer but there are so many other issues and variables that could potentially affect your decision.
For the average person purchasing a house, whether it’s their first or fifth, it will be the largest financial decision they’ll ever make. Here are the most important variables you need to consider before making an offer.
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Trying to pay for a house while you carry a lot of high-interest debt will be extremely difficult and could potentially put your entire financial future at risk. While the initial cost of a house can be quite daunting, the costs you’ll incur once you actually move in, can and will be just as overwhelming. This is why homeownership and high-interest debt do not mix. Mortgage payments are not flexible and they don’t come with a backup plan like a credit card’s minimum payment. If you have high-interest debt you need to seriously consider paying it off before you purchase a home.
Low Mortgage Rates
If you’re already thinking about purchasing a house, then the current historically low interest rates could be that extra push you need to make a decision. While low-interest rates shouldn’t be the only reason you buy a house, it is a good idea to take advantage of low rates as you’ll save money in the long run. Mortgage rates currently fall somewhere between 2 and 3%, which compared to the rate your parents had when they purchases their first home is extremely low.
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If the state or province you live in or are planning to purchase a house in is experiencing what we like to call a seller’s market, you’ll definitely want to take this into consideration while you house hunt.
A seller’s market basically means that there are a lot of people looking to purchase houses in a certain market or area but not quite enough good quality houses in the right location to meet the demand. What this does is allows the seller to call all the shots, create bidding wars, and list above-market prices because they know the demand is high.
In Canada, cities like Toronto and Vancouver experience seller’s markets. In The U.S., it’s cities like New York and Los Angeles (although recently, both countries seem to be becoming seller’s markets from coast to coast.)
Purchasing a home in a seller’s market could mean that you’ll need to pay more than you originally budgeted for. So if you’re on a strict budget or are simply looking for a reasonably priced house, you may want to consider avoiding a seller’s market.
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Stricter Mortgage Rules
While mortgage rates may be historically low, qualifying for a mortgage has not become any easier; in fact, it’s become even harder over the past few years.
Probably the biggest change and the one that might affect you and your mortgage the most is that the maximum mortgage amortization period on high-ratio mortgages (where the down payment is less than 20% of the purchase price of the house) was changed from 40 years to 25 years. This means that high-ratio mortgages now need to be paid off in a maximum of 25 years, not 40 years which in turn means the financial burden of owning a home is even greater than ever.
A shorter amortization period means that your monthly mortgage payments will be higher which means that not as many people are able to afford houses as they don’t have the income to cover the costs. If you’re thinking about purchasing a home we can’t recommend enough that you create a budget beforehand. This will allow you to see if you can afford to own a house.
Is Now the Right Time to Buy a House?
If you take into consideration the above four variables, then you should be able to decide for yourself when the right time to purchase a house is for you.
The most important steps you can take to prepare yourself are to:
- pay off your credit card debts
- save enough for a significant down payment, and
- learn to live within a budget.
After that, it’s up to you to take the first steps towards homeownership.
Ready to Buy a Property?
If you believe that you are ready to buy a property, start browning the newest listings on the AQRE Home platform today.
AQRE Home offers everything you need to make your dream home purchase a reality. Including:
- Hand-picked properties
- Filters to narrow your search
- A build-in messenger for easy offers
- Realtor connections across the U.S. and Canada
- Expert guidance from a team with 20 years of combined real estate experience
Get browsing and send offers with the click of a button on AQRE Home.