Is Now a Good Time to Buy a Home? Ask Yourself These Questions First

The housing market is always shifting.

As mortgage interest rates fluctuate over time, changes prompt potential buyers to wonder whether it’s a good time to invest in property.

With such dynamic factors to consider, it can be difficult to decide when to buy. That’s why we’re sharing time-tested advice from Nick Marascia, Chief Retail Mortgage Officer and Senior Vice President at Origin Bank.

Ask yourself the following questions before you make a purchase

Looking to buy? Make sure you can answer these questions before signing the dotted line.

1. Do I qualify for a home loan? Most mortgage guidelines require at least four things of potential lendees. Check to see if you have everything in order before you apply for a home loan:

a) Sufficient, verified available funds for the required down payment and closing costs.

b) Solid credit history and record.

c) Stable employment history and income verifications.

d) A debt-to-income ratio of 43% or less. This means the monthly payments on your debt, including your potential new home, do not exceed 43% of your gross monthly income. Unless you anticipate your income level increasing significantly in the next few years, most lenders recommend a DTI closer to 35%.

“The last thing you want to be is ‘house poor’ after you buy a new home,” Marascia advises. “Do your homework beforehand to make sure your home ownership experience is life-enriching, not financially draining.”

2. What is my timeline and backup plan? Many current homeowners cannot afford to buy a new home until they sell their current one — and, naturally, they want to make sure they have a place to live before they’re forced to move. However, sellers often hesitate to place their home under a contract subject to the sale of the buyer’s current home. This creates uncertainty and stress for many homeowners. So if you plan to buy a new home and sell your current residence at the same time, make sure you have a timeline in mind and a backup plan ready in case you need to move out sooner than expected.

3. How long do I plan on living in my new home? The housing market changes almost daily, meaning most homeowners view their house as a long-term investment. Historically, low home prices have typically rebounded and risen back to their previous levels — if not higher — over time. Therefore, the longer you plan to stay in your home, the less exposure to risk you have as a seller in the future.

“For most of us, our homes are primarily for shelter and enjoyment,” Marascia notes. “If you can comfortably afford the home you buy, think about how long you’ll be able to live there.”

4. What is the long-term value of my home? Because houses are typically considered long-term investments, their lasting qualities are important features to consider as a buyer. For example, you’ll want to evaluate the quality of your home’s construction and its location, both of which will have a long-term impact on its overall value and future price. And don’t forget the funds you’ll need to spend on maintenance and repairs over the years.

5. What level of risk am I comfortable with? The size of your down payment directly impacts your risk exposure. Larger down payments make you more secure in the event of a downturn in the real estate market, while smaller down payments reduce your immediate financial burden and free up money for other investments. Assess your investment goals and personal comfort level with risk, and then decide what size down payment makes the most sense for you.

“For many people, low interest rates and confidence that housing prices will continue to rise present a compelling case to buy now,” Marascia explains. “For others, high home prices and anticipation of a downturn in the housing market or employment can cause them to be more cautious.”

6. What are my remaining liquid reserves? After you’ve covered the closing costs and down payment on a new home, it’s a good idea to have remaining liquid reserves for additional costs and/or emergencies. A good rule of thumb is to keep at least three to six months’ worth of your mortgage payment available as liquid reserves. If you don’t have sufficient reserves right now, it might be best to wait on a mortgage and save until you’re more financially secure.

Have more questions? Check out our home loan calculators and resource center to learn more, and contact us to get in touch with one of our mortgage team members.