How to know if it's time to buy a home investinyou (In partnership with acorns.)
today. If you're considering buying a house, you'll want to look at a few things first, such as your overall financial picture and the total cost of home ownership. You'll also want to understand current interest rates and home market prices.
We've all heard the rule of thumb that you should ideally have 20% of the purchase price saved for a down payment on a home. Although you can qualify forwith as little as 3.5% down, a 20% down payment is still a much better idea, because you won't need to pay private mortgage insurance, will have lower monthly mortgage payments, and will pay less interest over the life of the loan. You'll also be less likely to end up underwater on your mortgage should housing values decline.
So, one way of gauging when it's the ideal time to buy a home is when you can afford a 20% down payment on the home of your choice. But wait — you'll also need to factor in other costs, such as insurance, closing costs, moving costs, repair and maintenance, property taxes, and so forth. Use aPeopleImages | E+ | Getty Images
Another rule of thumb: Are you depleting all your savings with the down payment? If you'll have no emergency savings left, or if you need to liquidate retirement accounts, then you should likely continue saving until your overall financial situation can accommodate the major expense of home ownership.
You'll also want to assess interest rate offers: Mortgage rates have been historically low for years now, but even so, you'll qualify for the lowest rates only if your credit is good, above a 720, or so. The best time to buy a home, according to this rule of thumb, is when your credit score is strong, and you have access to the lowest rates. Work on paying down debt and improving your credit score in order to receive the best interest rate offers from lenders.
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