For many people, a new home will be the largest and most expensive purchase of their lives. This is a purchase that can impact your daily living experience, your personal budget and your financial future for years to come. With so many significant factors hinging on this purchase, you understandably need to know if now is the best time to buy a home. 

There is no single time that is ideal for everyone to purchase a new home. Instead, you should focus your attention on a few critical factors to determine if the conditions are suitable for you to move forward with your real estate purchase plans. 

When Your Personal Finances Are in Order

Making a real estate purchase without a significant down payment is no longer common or even possible in many cases. By making a larger down payment, you can enjoy the peace of mind that comes with having built-in equity in your home. You can also set up more affordable monthly payments. The actual down payment amount that you should have available is dependent on the financing that you qualify for as well as local market conditions. For example, if real estate prices are high in your area and you have a very tight budget, you may need to make a larger down payment to establish a reasonable monthly mortgage payment. 

Your down payment is only one financial factor to focus on before deciding to jump into the real estate market. Analyze your credit rating to determine if you need to make improvements to your personal money management habits before buying a home. You may also need to correct errors on your credit report before applying for a loan. This could help you to qualify for a more affordable mortgage. If credit card debt or other personal debts are problematic, it may be helpful rein in these debts and to improve your financial health as a first step.

When Your Personal Life Is Stable

Some people purchase a new home with the intent to sell it within a relatively short period of time. For example, they may plan to relocate to a new city within the next year or two. These individuals may assume that real estate values would increase substantially and that they can sell their house quickly to lock in a profit. This may be true in some instances. However, market conditions fluctuate dramatically. Many homeowners have discovered that they must hang onto their home for much longer than they originally anticipated because of fluctuating market conditions. 

If you plan to increase your family size soon or if you will have an empty nest in the next year or two, it may also make sense to hold off on a real estate purchase in some cases. However, keep in mind that other options may be available to you besides selling the home. You could turn the property into an income-producing rental home. This sounds easier to do than it is, and it does come with significant responsibilities. If you decide that now is the best time to buy a home and if you intend to use the home as a rental property later, take time to research this path thoroughly before finalizing your purchase plans. 

When Real Estate Is Affordable

Some people feel pressured to buy real estate as soon as they have a down payment saved up because of a sense that real estate values are rising. Real estate prices have historically trended upward over the decades. More than that, land is in short supply, and the population continues to increase. With these factors in mind, you can realistically expect real estate values in many areas to continue to increase based on the laws of supply and demand. Nonetheless, real estate values do not take a solid, steady upward path. They increase and decrease in modest amounts as well as in substantial amounts at times. There are have been many incidents with double-digit reduction in real estate values in major and minor markets across the country. 

The real estate market is driven by a wide range of moving factors, so it is generally not possible to accurately time the market. With this in mind, the best time for you to purchase a home is when real estate is affordable for you. Take a moment to review the current prices in your area for homes that appeal to you. Remember that you can get a better deal in some cases when you look at foreclosures and distressed properties. You may also find more affordable options when you move farther out of a major metro area and into the suburbs. If you discover that real estate is not affordable for you right now, continue to save money to make a larger down payment. At the same time, monitor real estate prices so that you can act quickly if prices dip.

When You Qualify for a Great Home Loan

The affordability of your new home is dependent on the home loan that you qualify for. Your mortgage payment is dependent on three primary factors. These include the loan term that you select, the interest rate that you qualify for and the loan amount that you apply for. In many cases, these factors are linked together. For example, you may qualify for a better interest rate if you make a larger down payment. 

Keep in mind that the interest rate and terms that mortgage companies advertise are usually based on a very large down payment and an applicant with a stellar credit rating. In order to determine the specific terms that you qualify for, you will need to contact a few lenders directly and get prequalified. Be aware that the loan amount that you are prequalified for may not necessarily be affordable for your budget. A loan prequalification means that you meet the lender’s requirements for a specific loan amount. The lender does not review many personal factors that may influence housing affordability, such as your personal savings rate, your childcare expenses, your preferences for weekend entertainment and other factors. Many buyers decide to purchase a home with a more affordable sales price than what they have qualified for because of these and other various factors.

Deciding when to buy a home is not a matter to rush into. Spend time analyzing each of these factors carefully, and reach out to a lender and a real estate agent for assistance researching financing options and market conditions. By taking these initial steps to prepare for a purchase, you can proceed more confidently when you decide to move forward with your plans.