You’ve probably heard that mortgage rates are at record lows these days and that makes this a great time to buy a home.
But is that actually true in your case? Is this really the right time for you, personally, to take that big step?
Before you start house hunting, use this list of considerations to help inform your big decision. See for yourself how many boxes you check.
1. If You’ve Got Good Credit
Your credit score should be high enough to qualify you for a good rate on a mortgage.
Your score ranges from 300 to 850. It’s like a grade that tells banks and credit card companies how well you manage money and repay debt. The better your score, the better deal you’ll get on a mortgage, potentially saving you tens of thousands of dollars over time.
Generally speaking, a score of 750 to 850 is considered “excellent,” 700-749 is considered “good,” 650-699 is “fair” and 300-649 is considered “poor.”
2. If You’ve Got a Down Payment Saved Up
A down payment is the amount of money you pay upfront for your home — the money you’re putting down. For example, if you wanted to put 10% down on a $200,000 home, your down payment would be $20,000.
The more you’re able to put toward a down payment, the lower your monthly mortgage rates will be — and the less you’ll pay in interest over time.
According to the National Association of Realtors, the average down payment for first-time buyers these days is about 6% of the home price.
But if you’re able to put down 20%, you can skip making monthly payments for private mortgage insurance — an additional expense that typically costs between 0.5% and 1% of the total value of your mortgage.
And buying a home isn’t just about the down payment. You’ve also got to consider the closing costs, property taxes, potential HOA fees and maintenance needs, to name a few. Be sure your budget is ready.
3. If Your Job is Secure
Only you know how secure your job is. In this ongoing pandemic/recession/economic minefield, there are a lot of unknowns.
But you don’t want to put yourself in a position where you might default on your mortgage. That could make it significantly harder to buy a home again, if you want to try again in the future.
Buying a home is a big step. In the big picture, this is a good time to do it because of historically low mortgage rates — but you want to make sure you’re ready for it.