Should I Buy a House Now or Wait Until Later?

© 2009, Brandon Cornett. All rights reserved.

Reader Question: I have gotten a mixed message from the media about the economy. Should I buy a house now or wait a while longer? Is now a good time to buy?

The mixed messages you are getting come from differences in opinion. It also comes from the fact that this question cannot be answered one way or the other across the board. Every home buying scenario is different, so it’s something to be considered on a case-by-case basis.

The best thing I can do is help you answer this question for yourself. There are two key factors you must consider, when deciding whether to buy a house now or wait until later. You must consider (A) the general economic conditions in your area and (B) your personal financial situation. So let’s take a look at both of these.

Buy Now or Wait - 2009 Economic Factors

Let’s put your financial situation aside for a moment to take a look at the economy in general. Right now, mortgage rates are at their lowest point in decades. At the time this article was written (May 2009), the average interest rate for a 30-year fixed mortgage was 4.86% … and that’s a darn good rate! So that’s one thing home buyers have in their favor right now — at least, if you can get qualified for those low rates.

Home prices are also at record lows in many cities, which is a direct result of the housing collapse we just endured. Surplus is high too, so there are plenty of house to choose from. Add to this the $8,000 tax credit for first-time buyers, and you have plenty of reasons to buy a house now instead of waiting until later. Low interest rates, low prices, plenty of inventory, and a tax credit of eight grand. These are all good reasons to buy now.

Of course, these are general economic factors — not personal factors. All of the reasons to buy that I’ve mentioned above could easily be negated by personal financial problems. So you have to factor your own situation into this decision as well.

Your Financial Situation

Even in the best economic times, some people just aren’t in a position to buy a house. Maybe their budget is too small for the local housing market, or perhaps they are carrying too much debt. So when you are weighing the decision to buy a house now or later, you must ask yourself the following questions:

• Do I have steady employment now, and I expect it to continue for the foreseeable future?
• Do I have enough cash for a sufficient down payment (at least 3.5% for FHA loans and 10% for other loans)?
• Have I evaluated my income versus debt to establish a home buying budget?
• Is my credit score currently 650 or higher, or do I need to work on improving my score?
• Do I have my current level of debt under control, or am I buried in debt?

You should be able to answer all of these questions favorably, before moving forward with the home buying process. You need to make sure you are well prepared, financially, before you start talking to mortgage lenders. If you pass the “test” above, you’re probably in a good position to purchase a home. And when you combine that with the economic factors outlined above, you might find that now is a great time to buy.

Disclaimer: I am not recommending that you buy a house now, or that you wait until later, because I obviously don’t know enough about your situation. The information offered above is designed to help you answer this question for yourself, by weighing all sides of the issue. I encourage you to do plenty of homework before buying a house, evaluating your own finances as well as the economic conditions in your area. Good luck.