For most, buying a house is the biggest purchase they'll ever make. So it's understandable that a lot of thought goes into this decision, and whether it’s a good time to buy a house.
Interest rates have been soaring recently, which means mortgages and loans could cost more too. And it’s got a lot of potential homebuyers asking: is it smart to buy a house right now?
So, if you’ve been on the market for a home, this blog post is for you! We’ll help you shed much-needed clarity on whether you should buy now or wait it out.
👀 3min read
We know this may seem controversial. Interest rates are going up and up and up – and yes, your payments will be more costly.
However, when interest rates are high, home prices should come down.
We’ve already seen this trend in some cities. Home prices are slowly dropping to factor in these new interest rates.
So, don't be scared to buy a house right now.
Because depending on your financial situation, and the town or city you’re looking to buy, the numbers might even out.
(And if not, how do you get there?)
Keep reading to find out – and know that we’re here to help you dive into the nitty gritty with our home-buying module, accessible within our membership.
Before you ask if right now is a good time to buy a house or not, we need to take it one step back: into your wallet.
How do you know if you can afford to buy a house right now?
If you were already in the market, this answer is probably easy, since you already know:
Not sure what your numbers are? Start there!
(Like we said: We're here to help. As a Penny member, you get a mini-budget smart calc to make the housing math easier.)
Already know your budget? Great! In that case, let’s skip to the next step: the dreaded housing math!
Once you know your numbers, think of how your home purchase may impact your wallet, given the new mortgage and interest rates.
Your budget was $500k for a house.
Let's pretend you contribute 20% to the down payment.
Can you afford to pay an extra $700 dollars a month?
With today's interest rates, a $1,900 payment would only get you a $375k house. Last year, a $1,900 payment would get you a $500k house --- because you have to pay much more in interest over 30 years. So, you either need to lower your budget for your home or increase your payment.
Not following this math calculus? Here’s an explainer video:
Like we said earlier: Home prices should come down.
You might need to wait it out a little bit longer for the market to “course-correct” to ensure you don’t overspend for a house.
But if you’re getting the home for cheaper than it was at the peak of COVID?
It’s definitely worth considering the investment.
Afterall, in the grand scheme of things, what happens with interest rates over the next few months or years won’t matter.
If your wallet’s happy (aka you can comfortably afford your payments) and you’re happy in your new abode, that’s what matters.
And if you still need a hand making both your wallet and heart happy with a potential home purchase? Become a Penny member to explore the Homebuyers money module, and much, much more. Get access here.
Reading pants still on?
Check out this comprehensive list of actions to help you prepare to buy a home: Read blog post here.
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