Buying a house is a major milestone in our lives and something that many of us look forward to once we are ready to fly the nest. However, actually purchasing a property isn’t quite as straightforward as it sounds and something that will play a significant factor in your ability to buy will be timing when exactly is the best time to press ahead with your home purchase.
Whether your first home or subsequent property, determining the right time to buy a house is often just as crucial as the elements of the buying process itself. This is because timing can make a huge difference in terms of your finances. Buy at the right time and you can have your pick of the properties in your chosen area and bag yourself a veritable bargain. However, purchase at the wrong time and you may have very few options and find that your budget doesn’t go as far as you might have hoped.
It is important to remember that every buyer is unique and has their own personal circumstances. This can mean that what is the right time for you isn’t necessarily the optimal opportunity for someone else. Nevertheless, there are some general times that could denote that it is time for you to make your move onto the first or next rung on the property ladder.
In order to buy a home, you need to be able to prove that you can afford to pay for it and prove to lenders (assuming that you need a mortgage), that you are a reliable and responsible borrower. This involves several elements, namely:
- A down payment (usually at least 10% of the property price)
- A strong credit score which will show that you meet your financial obligations on time each month
- You have sufficient income each month to repay not only the interest on your mortgage but also make payments towards the balance of the loan
The stronger your financial position is the better. If you need a homeownership loan, you will be offered lower interest rates and other, more favorable terms that will benefit your bank balance. If you have a mortgage agreed in principle, or if you are a cash buyer, you will have strong buying power when it comes to putting in an offer as you will have the funds in place to be able to proceed with the purchase as soon as possible.
Interest is the percentage that you pay on top of your mortgage repayment amount every month and is the return on investment that your mortgage lender receives. Over the last few years, the Federal Reserve has sustained policy of raising interest rates in order to keep inflation low and the economy stable. However, higher interest rates can make a big difference to your monthly repayment and the overall amount of interest you will pay over the course of your mortgage.
For example, at 5% interest, a $300,000 mortgage with a $60,000 down payment would equate to an average monthly mortgage payment of $1288.37. The same mortgage at 4% interest would only cost you around $1145.80 per month – so around $140 a month less. However, over the period of a standard 360-month mortgage you will pay around $223,813.00 interest to your lender, compared to just $172,486.00 with a 4% interest rate. That’s a whopping $50k over the course of your entire mortgage!
For this reason, it is essential to maintain a great credit score to increase your chances of getting offered the best rate possible and keep a close eye on interest rates so that you are ready to strike while you can save money on your mortgage.
One of the best ways to get a great deal on your property purchase is to strike when there are plenty of homes available on the market and so sellers need to be competitive on price in order to sell. This means that you are more likely to have a lower offer accepted or reap other financial benefits that will save you money and potentially reduce the amount that you need to borrow.
In most cases, demand for property is lower in the spring and summer as this is when families put their homes onto the market so that they can relocate and get settled before Labor Day and the start of a new school year.
If you would like more information on making a property purchase, including when it is the right time for you to buy a house, please don’t hesitate to contact our offices where our expert team will be happy to help.