3 Reasons if you can wait to buy a home, you should

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Tom Petty is right – the waiting is the hardest part.

Main idea

  • Buying a home is a big, expensive process, and it has gotten more expensive lately due to high mortgage and housing prices.
  • If you take your time, you will be able to work on improving your score.
  • You can also set yourself up for bankruptcy if home sales slow or interest rates drop.

If you are currently renting but are ready to become the owner of the house, I am very sorry. That said, considering how expensive it is to own a home and maintain it, it’s not something to be rushed or taken lightly. Remember, your values ​​don’t end after you receive one mortgage, confirm, go shopping, and go home. You are responsible for maintaining the home, paying property taxes and Homeowners insurance bills, etc.

And since then cost of home ownership are much higher now (thanks to higher home prices and higher mortgage rates — a real doubling of spending), it makes more sense to spend time to think and plan before jumping into buying a home.

Back in late 2021 and early 2022, my plan was to buy this year, but it reconsider that plan. And while I’m not happy, I know it’s the right move based on the housing market as well as my own finances. That’s why it’s nice to wait to buy, if you can.

1. You can improve your credit

This is the first reason waiting on home ownership is a big deal. One of the best ways to save money on a home purchase is to go in with your credit in the best possible condition. How come? The quality of your credit score, the lower the interest rate you qualify for a mortgage loan. You can also shop around for multiple quotes from different lenders to make sure you’re getting the best possible price.

By waiting, you are giving yourself time improve your credit score. This three-digit number has a big impact on your financial life, and thanks to it, you can raise it in a few different ways. If you pay down debt, especially credit card, you will reduce your amount of credit utilization (to improve your credit score, you should only use 30% or less of your credit availability). Your credit history makes up 35% of your credit score, so if you’ve been a bit lax about paying your debts on time, here’s your chance to build good habits. and watch your score improve.

You can also pull your credit report (available for all weeks until the end of 2023) and comb it for mistakes. If you find an error (such as a loan you’ve paid to show proof, or someone else’s credit report), you’re eligible to have it removed, which will increase your score.

2. You can save your money down — with an emergency fund

In addition to a high credit score, another thing you’ll want to consider when buying a home is a deposit. Although it is not a special requirement that you make a 20% down payment on a home, if you can do it, you will avoid paying extra for private individuals. mortgage insurance (PMI) on a conventional loan or mortgage insurance payments (MIP, confusingly) on an FHA loan. Also, go in with a big one minimum wage This means you will be borrowing less and therefore less of a risk for your mortgage. You may also qualify for a lower interest rate. As they say, you have to spend money to make money.

It’s not just about saving money, it’s about saving money closing price (usually 2% to 5% of the value of your home). You may also want to have some savings to cover any expenses on your new home after the purchase. If you decide to repaint, for example, it’s nice to be able to pay those costs directly instead of going into debt to finance it. Make your future successful and avoid bankruptcy after buying a home.

It is also important to have a funds for emergency care saved. Remember, it’s your responsibility to sign (continue) all those documents to officially close on your home. If the roof bursts or the hot water system bursts, you are responsible for the cost of repairs and replacements. And even if Homeowners insurance policy to cover some or all of your repair costs in certain home accidents, you will still need to pay the cost of your deductible.

3. You can strike when the time is right

Finally, if you’ve been waiting to buy a home, you can jump into the process when the time is right for you to save. There aren’t as many customers in the winter months, so you can find a bargain (and less competition) when you do. You can also set yourself up to move forward with getting a pre-approved mortgage when prices fall.

Finally, hitting the brakes when you feel ready to buy a home can be frustrating. But with such a large amount of money, it’s a good idea to give yourself every chance to succeed. Waiting — and taking steps like improving your credit and saving more money — can get you there.

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