Are you thinking about buying a house? It can be hard to decide whether to buy a house now or wait until all your financing options are in order. In this post, you will learn when is the best time to buy a house for your situation.
Owning a home has always been considered a great and safe investment. Whether you are a first-time homebuyer or someone looking for their dream home, home-buying is a financially sound and sensible process.
Many of my peers are buying houses, and I have to admit that I’m also considering it. Even though I’m living very cheap currently, I don’t want to live in this house forever. A new home is part of my plans in life but the more pressing question is when do I do my home purchase?
If you are considering buying a house, do you buy a house now or wait? When is the best time to start the buying process? What factors should you consider when buying a home? Is there a homebuyer education we can study and learn the basics of buying a new home?
Purchasing a house is a major investment, which I believe people are underestimating. That’s why you should dive in and understand all the paperwork you need to go through before making your rent-to-buy decision.
When Is The Best Time To Buy A House?
You will have to look at these 5 tips to decide.
1. Your Current Financial Health
When you’re considering buying a house, the current state of your finances is very important because of two reasons:
- Do you have cash for a down payment? In the Netherlands, your current down payment would be around 10% of the value of the house. It means that you can’t get any mortgage for more than your house currently is worth.
- Can you afford the mortgage? It’s an obvious and very important question to ask; can you afford the mortgage? If you take a fixed-rate mortgage, your payments will stay the same over the mortgage term. However, if you’re taking an adjustable-rate mortgage, you should consider if you can still afford the payments when the interest rates go up in the future.
To be sure that you can pay the mortgage, plan some scenarios over the upcoming few years and see if you can still pay your mortgage. Go to #2 to read this in more detail!
If your initial interest rate is lower, but you’re having an adjustable-rate mortgage, please think about it twice before you take this mortgage.
What if the interest goes up 5% in the upcoming years? If you need to find a creative way to finance your mortgage, don’t do it!
If you’re having a hard time getting together the down payment for a house, there are several ways you can do so:
- Save over half your income, which is the fastest way to save for your down payment
- Cut your utility bill in half
- Follow these 25+ easy money-saving tips
- Up your passive income game and get some passive income every month
- Do side hustles in your free time
Usually, when applying for a mortgage, they will also check your credit scores. Make sure your credit report is mortgage-ready, as this will determine your interest rate. Check your credit score once in a while before starting the process. Having a good credit score and credit history will help you reach good mortgage rates for your monthly payment once approved.
Credit Sesame is one way to help you. It is a personal finance tool that helps you with your credit. It also gives recommendations for you to manage your debts well. You may check our full Credit Sesame review for more details of the platform.
2. Your Future Finances
Besides your current finances, it’s also important to look at your future finances.
Are you thinking about changing jobs, adjusting your family situation, or changing your income? Think it through before you apply and get a home loan in order to buy a house.
It might be a good idea to wait until your financial situation has stabilized. Especially for borrowers who will have a monthly mortgage payment to consider, your financial situation should be solid and stable for the time being.
In addition, an emergency fund can come in handy in case of unforeseen events. If you need some kind of surgery or you’re laid off, an emergency fund will save you!
Your emergency fund should entail a few months’ worth of living expenses in cash. It is recommended to start building your emergency fund before you buy a home.
This emergency fund will not only come in handy before you buy the house, but it’s also ideal to have once you are a homeowner. It will cover unexpected repair costs and similar expenses that you did not think about.
[Related Read: 7 Dave Ramsey Baby Steps For Financial Freedom [Make It Work]]
3. The Current Market
Market conditions can be quite important. This very much answers your question: Can I afford my first home? Is there a loan program that suits my financial status?
What market conditions can do:
- In this case, interest rates are extremely low. It may be a good time to buy a house because your monthly payments will be lower than when the interest rates are higher.
- If there is more demand than supply, housing prices will rise. This will mitigate the effect of lower interest rates.
- If property values are declining, which is currently not the case, it might be a good time to wait. If you wait a couple of months, you could end up getting a discount on your house.
It is very hard to predict what the property market or the interest rates will do, however, it’s still a factor worth considering.
[Related Read: A Simplified Look At The Savings Rate]
4. You Are Responsible
Being a homeowner comes with all different kinds of responsibilities.
You have to take care of any maintenance and repairs that have to be done around the house. You have to take action yourself instead of calling someone who takes care of everything that needs to be done around the house.
Some people don’t mind taking over the chores in the house and taking responsibility for them. Others would rather not deal with these kinds of things and don’t want to think about it.
Consider what kind of person you are. When buying a house, you should consider the utilities and expenses that come with homeownership and how it affects you personally.
[Related Read: Frugal Vs. Cheap – Where Are You At?]
5. Duration Of Stay
When you’re planning to buy a house, you have to be committed to your home. There are high costs associated with buying your house, so you should keep those in mind.
In the Netherlands, you pay an average of 10% of the value of your house in extra costs, like real estate agent costs, notary costs, and mortgage fees. This money needs to come from your own savings.
This means that when you buy a house of $150,000, a total of $15,000 needs to come from your savings account. You cannot take a higher mortgage for this amount.
With these kinds of costs, it’s challenging to make money on a home unless you decide to live in it for a while.
You should at least live in the house for 3-5 years, but longer is recommended. When you stay in your home for a longer period of time, the initial costs will be spread out over a longer period of time.
I would advise staying in your house for at least 3-5 years, and the longer the better!
Conclusion – When Is The Best Time To Buy A House?
When you purchase a home, it’s not only about finding a house you like based on the price range you want against your monthly income. Affordability is certainly a factor and the certainty that you can pay off your loan amount is very important, but you also need to consider, especially for first-time buyers, that homeownership is a responsibility that you are undertaking for you and your family.
So you need to make sure that when you do find a home, you should have understood the fees, payments, and borrower’s responsibilities you will be doing as part of your mortgage loan.
These home buying tips will help you prepare for what you should expect when making this big decision. Home loans are a tedious process but are an essential one in the home buying process. There are a lot of loan options for you out there, you just need to find the best assistance programs that fit you and you may qualify before purchasing a home you want.
House-hunting for you and your family can be an enjoyable and worthwhile journey. But always remember it doesn’t stop there. Creating a perfect home is as important as the journey to get there.
Have you decided to buy a house now or wait?
Founder of Spark Nomad, Radical FIRE, Journalist
Expertise: Personal finance and travel content
Education: Bachelor of Economics at Radboud University, Master in Finance at Radboud University, Minor in Economics at Chapman University.
Over 200 articles, essays, and short stories published across the web.
Experience: Marjolein Dilven is a journalist and founder of Spark Nomad, a travel platform, and Radical FIRE, a personal finance platform. Marjolein has a finance and economics background with a master’s in Finance. She has quit her job to travel the world, documenting her travels on Spark Nomad to help people plan their travels. Marjolein Dilven has written for publications like MSN, Associated Press, CNBC, Town News syndicate, and more.