When people think about buying a house, most of the time they only focus on the current status of the local housing market. But it’s also very important to consider your financial situation and life goals. If you take both of these into account, you may get an idea of when is the good time to buy a house.

The Status of the Local Housing Market

Here are some factors that could be helpful in deciding whether this is the most appropriate time to buy a house.

  1. Mortgage Rates

In comparison to 2021, mortgage rates went up historically to the start of 2022. As a result, the average interest rate on a 30-year fixed-rate mortgage has jumped to 4.966% APR by April 4, 2022 (Source: NerdWallet’s mortgage interest rates forecast). The economists forecast that rates will continue to rise throughout the year 2022.

Such higher mortgage rates make it even harder to buy a home amid the shortage of homes on the market. Because with lower rates, mortgage loans are more affordable to the people allowing them to buy a house in good condition for a reasonable price. For example, if the current interest rate is 4%, someone who can pay $6,000 as the monthly installment can afford to borrow $1,256,800.

But when the rate goes up to 5%, the same buyer can only afford to borrow $1,117,700 (Source: NerdWallet’s mortgage interest rates forecast). The interest rate rose just by one percentage point, but the buyer lost $139,100, depriving him of the chance to buy a good, comfortable home for his family. Therefore, it’s important to consider current mortgage rates when buying a house.

  1. Increased Competition

The competition for single story homes in Las Vegas among the buyers increases when the demand is high, but there are fewer houses to buy. As this happens, the home sale prices rise, and the homes listed in the market are selling more quickly than ever. According to the National Association of Realtors, most homes sold in the last year were on the market for less than a month. The competition among the buyers is advantageous to the sellers, but it’s a downside effect from the buyer’s perspective. Therefore, it’s always profitable for buyers to buy a house when there is a high inventory on the market.

  1. Home Sale Prices

Home sale prices have been increasing over the years, but forecasters predict that, in 2022, they will rise at a slower pace than in 2021. According to the predictions by the National Association of Realtors, home prices will only rise by 2.8% this year, and it is much lower than the estimated increase of 14.7% in 2021. Therefore, home sale prices would only increase by a smaller amount than the last year.

  1. Credit Score

The credit score is another factor that affects buyers in today’s market. According to the Mortgage Bankers Association, the availability of mortgage credits dropped to 30% in December 2021 than in the previous years. Though the credit requirements for obtaining a mortgage have eased, lender requirements remain relatively strict. So, if you have a low credit score, it may be harder to qualify for a mortgage.

Your Financial and Personal Stability

Just analyzing the status of the local housing market is not enough for you to decide whether this is a good time to buy a house. You must also consider your financial and personal readiness before jumping off to buy a new house.

  1. Financial State

When it comes to buying a house, you must consider your savings, credits, and debts. You need to have enough savings in your account because you will have to pay a down payment, mortgage closing costs, and other expenses like moving or relocating costs. Moreover, you must have a good credit score to be qualified for the best mortgage rates and terms. Usually, if you have a credit score of 740 or above, lenders give you the best rates and terms.

However, even with a score of 600, you can still qualify for a mortgage. If it is in between 500-599, your options could be limited to only 1% of all purchase loans will be given to the borrowers with such credit scores. It becomes harder if your credit score is less than 500, and the wise thing is to postpone your idea of buying a house and build up your credit score.

Not only your credit score, but lenders also look at your debt-to-income ratio (DTI) as qualifications for a mortgage. DTI is the percentage of your monthly debts to your monthly gross income. Generally, if your DTI is under 36%, then you can be qualified for a mortgage. However, the lower your DTI, the higher the probability of getting a mortgage. So, it’s important to consider both credit score and DTI when you’re deciding to buy a house.

  1. Income Security

You must have a permanent job or a successful business if you’re thinking of buying a new house. Because a mortgage is a liability that you may have to bear for a long time, it can be stressful and frustrating if you’re not in a stable situation income-wise. So, it’s better to wait for a while until your income stabilizes before thinking about buying a house.

  1. Personal Readiness

You may be financially ready to buy a house on the golf course but think about whether you’re ready to put down your roots at the new house. From time to time, our life goals, relationships, and interests can vary. So, think harder about those before deciding to buy a house. Because, if you buy a house, you must live in it long enough to raise the property values and your equity so that they will exceed the costs of buying and selling the house. Usually, it takes several years. Therefore, think about whether you’re ready to move into a new place as it can be an emotional crisis to relocate leaving your friends and family behind.

So, instead of just considering the status of the local housing market, think about whether it’s an appropriate time for me to buy a new house.