How to decide it’s time to buy a house?

When you reach a certain age or start a family, you may feel the pressure to buy a home. Family and friends will often advise you to buy a home and not waste money on rent. There is no denying the fact that everyone has a dream of owning one’s own house one day. But is it the right time to realize this dream and buy a house?

There are many factors that should be considered before deciding that it is time to buy a house. It is important to determine whether you are ready and stable enough to purchase a home at this point of time. The factors that should be considered when timing your home purchase typically fall into two categories: your personal life factors and market factors.

Personal life factors

Your financial situation:

Buying a house will be your life’s biggest financial investment. So you will have to consider whether you have enough money to buy a house with your own resources. If not, you will have to arrange the finance from a bank. You will have to take a home loan. Ask yourself whether you have the income and credit rating to qualify for the loan. If you do qualify for the loan then choose a bank which will charge you the lowest rate of interest. Use Loan Comparison Engine’s like Kredit.in and other similar websites to compare home loan offerings of different banks.

If you get the loan, you will be required to make a down payment of 10% to 25% of the total cost of the house. In addition you will have to bear other expenses such as stamp duty to get the house registered in your name. If you are getting the house through a broker, then you will have to pay him the brokerage which is generally 1% of the total cost. Other additional expenses include property taxes, insurance, Home Owners Association fees (HOA), payments for water storage, power back up, sewer & garbage management and many other utilities. Apart from these expenses, you may have to get the house renovated and buy some additional furniture and fittings to meet your requirements and taste. Also keep in mind the expenses involved in shifting to this new house. 

And that is not where it ends. After meeting all these expenses, you should have enough left over in your bank to meet any unexpected expenses like medical and other unforeseen emergencies. Thus, this becomes your life’s biggest investment. So, the question you should ask yourself is whether you can afford to make this kind of investment, at this point of time. Also consider very carefully what would happen if you were to lose your job. Would you be able to pay the EMIs? 

Are you ready to commit to this town and locality

Before embarking on the arduous journey of buying a house you should ask yourself whether you are committed to staying in this particular city or locality. Do your future job or career plans match with this town and locality? If you know your job will transfer you or you plan to move due to certain life events, you may be better off renting a home rather than buying one. The rule of thumb is to buy a home only if you plan on being in the area for at least next ten years. So the right time to buy a house is only when you are sure that your present job is permanent and you are not likely to move. 

Market factors:

Another factor which should be taken into consideration when deciding whether it is the right time to buy a house, is the current rate of interest. Lower interest rates will lead to lower monthly payments. Since a home is such a big purchase, even a fraction of a percentage can save you a great deal of money in the long run.

It’s also a good idea to pay attention to the current housing market. The trend of the market is linked to demand and supply. If the demand for housing is low and the supply is good, the prices will be low. This is known as a “buyer’s market,” when there are lots of homes on the market and not much competition for them. In this situation, sellers are usually willing to drop their prices or make other concessions in order to get their homes sold. So, the best time to buy a house is during the recession so you can get the best deal.

In conclusion, we can say that the best time to buy your home is when you are holding a stable job and financially sound. You should have enough money saved up to make the down payment and the capability of paying the EMIs regularly. Also you need to be certain that you will be residing in that city or locality where you plan to buy the house, for at least the next 10 years. It is also recommended that you should do some research about the current interest rates and the trend in the housing market before taking the plunge. Remember, if the timing of the purchase of your house is not right, it can spell mental and financial disaster. So, do give careful thought to these factors before deciding that it is the right time to buy a house.