Many would-be home buyers may be wondering, is 2017 the year to finally sign the dotted line?
The experts predict a continued strong market: In 2017, sales are forecast to grow an additional 2%, to 5.52 million, according to Lawrence Yun, chief economist of the National Association of Realtors.
The 2017 housing market is already off to a quick start, notes Jody Clower Rotman, founder and CEO of Nestiny, a home buyer education site. With mortgage rates still near all-time lows and more homes being listed for sale, buyers have many choices and the ability to get the ideal home for their budget, she says.
Mortgage rates are expected to climb slowly this year, according to Bankrate.com. The historically low rates of around 3.5% percent for a 30-year fixed rate mortgage witnessed in 2016 are but a recent memory. Rates are expected to go as high as 4.7 percent by the end of 2017, which could be reason enough for some not to delay buying house any longer.
However, the reality of whether it’s a good time for you to buy a house rests on your own personal situation. Here are four questions that can help you decide.
1. Does it make more sense financially to buy than rent?
If you think renting always costs less, you may be surprised, says Steve Brant of Brant Regency Estates & Homes in San Diego.
“When you’re deciding whether to buy, you should be less focused on market timing and more focused on the economics of renting versus buying,” he says, suggesting that would-be buyers do their own analysis on a “rent vs. buy” calculator such as one at Realtor.com.
Many buyers might qualify for down payment assistance, and he adds that homeowners can claim a pretty healthy tax deduction.
“That means a $2,000 monthly rent could be the same as a $2,700 monthly mortgage on an annual cash flow basis,” he says.
2. Do you see yourself staying where you are for the long term?
Buying for the short-term rarely pays off financially.
“There are costs involved with buying and selling homes; therefore it is very rare to purchase a home and make a profit without waiting at least three years,” says Cyrus Fiene, a real estate broker with Coldwell Banker in Seattle.
When choosing a property, consider not just the house itself but the surrounding neighborhood and amenities.
“When we buy a home, we are not just buying the land and structure, but we are buying into the neighborhood, the nearby parks, the local coffee shop and school district,” he says.
Consider whether you intend to stay in the area and whether the house you are buying will still suit your needs if you have children, for example.
3. Are you in a financial position to qualify for a good mortgage rate?
Before you start house shopping, consider your current credit situation and whether you will qualify for the lowest rates, says David Hosterman, branch manager of Castle & Cooke Mortgage, LLC, in Greenwood Village, CO.
“We are looking for a pattern of good credit; in general we require a customer to have 12 months of on-time payments,” Hosterman says.
If your credit score is currently low (generally that’s considered below 700), you might want to focus on bumping it up to avoid paying higher interest rates.
To find out your credit score, visit Annualcreditreport.com, where you can check your credit scores from each of the three credit bureaus free each year. You can also request a free copy of your credit score through Creditkarma.com.
4. Can you afford all of the costs associated with buying a home?
Sometimes it can be easy to focus on your monthly mortgage as the key piece for being financially ready, but that is just one aspect of buying a home. You also have to consider the down payment, monthly mortgage, yearly taxes and other upkeep costs of owning a home, says Evan Harris, co-founder of SD Equity Partners.
“As a renter, you have the luxury of calling your landlord to replace that broken washer or repair the leaky roof, but as a homeowner, those responsibilities are yours,” says Fiene.
He recommends that homeowners plan to set aside 1 percent to 2 percent of the home’s value toward repairs or upgrades annually.
Making an educated decision
“If the answer to these questions is yes, chances are it is time to own a property, especially as demand and price will continue to increase as more people enter the market,” says Harris. “As we say in the industry, ‘The best time to buy a home was 30 years ago; the second best time is today.’”
However, adds Brant, “Wondering if there is a good time to buy is like wondering when would be the best time to have kids. It may be impossible to know the ‘right’ time, so you need to take the plunge in the most educated manner possible for your individual situation.”