When buying a home, the general rule is to take advantage when the market is at its lowest. It ensures you get the best value for your money and reduces the risk of losing out on savings. That’s the dream, right?
The problem is it’s not easy to predict when the housing market will bottom out. And even if you could, chances are you’re not always in the right place in your ever-changing financial situation.
Is it okay to buy a home during peak home values? Yes! But the decision narrows down to your finances. Here we’ll go over a few factors that might influence your decision to purchase a home now.
If You’re Planning To Stay For A While
Buying a new home comes with a closing cost. It can be anything between 2-6 percent of the purchase price. The money is not part of your mortgage and comes from your pocket.
It’s only reasonable to be certain that you won’t be moving houses anytime soon to justify such a high one-time transaction cost. If you plan to stay at least 10+ years in that home, then buying a house during peak values is okay. Also, if you’re financially stable enough to hold on and rent it out later, it’s still okay. In fact, you’ll always recover your investment.
If you know or feel confident that you’ll be moving out in three years or less, consider signing a long-term lease instead.
Do You Have Enough Savings For A Down Payment
Apart from paying the closing cost, you will need a fair amount of money. If you have a sizable cash pool that can make a significant dent in your down payment, buying a home at peak value is okay. Also, ensure you have plenty left over.
Most lenders feel more comfortable dealing with buyers who can pay a sizable percentage of the purchase price upfront. They also prefer clients with a cash reserve enough to cushion an emergency. Saving for a down payment is always ideal for homeowners, but it is even more so in the case of peak values.
Do You Have an Excellent Credit Score
Your credit score is an essential factor when buying a home. Lenders use it to determine your credibility as a borrower and decide whether they should approve or deny your mortgage. In the case of peak values, an excellent credit score can give you the edge.
A high credit score of 740 and above means you can get better mortgage terms. You’ll also be able to negotiate better with the seller when trying to get the best possible deal. And you’re likely to qualify for better interest rates and a lower loan-to-value ratio.
The truth is real estate prices might take more than two years to resume pre-pandemic norms. An expert survey predicts it will take until 2025 before the monthly available home inventory matches the demand.
Therefore, if you’re planning to buy a home during peak values, it’s best to evaluate your financial situation first. It’s not entirely a bad idea, depending on the circumstances.
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