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Four Reasons Why It Might Not be the "Right" Time To Buy a Home

There may never feel like a "perfect" time to commit to buying a home, but there are some scenarios that should be considered at least a red flag in making one of the largest purchases of your life. While there are so many great reasons to buy rather than rent, sometimes it does make sense to wait based on your current circumstances. Here are four questions to ask yourself to see if you should be thinking of buying now or waiting.

  1. Are you thinking of moving out of the area within the next year or two? If your timeline for living in a property is going to be two years or less, you may not have time to weather market adjustments and build enough equity to justify the costs of buying and selling a home. If you do end up with a decent amount of appreciation, those gains will be taxed at the capital gains rate if you sell in less than two years.

    If you are still wanting to buy anyway, consider if you would be willing and able to rent out the property in order for the market conditions to improve in your favor before selling if necessary.  This strategy may involve hiring a property manager but this could be a great opportunity to start building a real estate portfolio.
  2. Do you have inconsistent income? If you are in a temporary work situation, a seasonal industry, or there is a threat of job loss, it may not be the right time to buy a home. A large unexpected expense like a new furnace can be a huge burden especially if you are not feeling secure about your income.

    If you are on a commission or bonus based income, you may just have to get used to the fluctuations in income and make a habit of saving more during times of feast and budget expenses based on your worst case scenario.

  3. Do you have bad credit or no credit? If you have a FICO credit score under 620, you may have some work to do to qualify for a loan. If you do qualify, it may not be the best rate so it can pay off to work on building your credit score by paying down debts, making payments on-time, and not opening or closing credit accounts.

    Talking to a mortgage lender about your situation is a good way to see what you may already quality for. A good lender can also give you specific advice on the steps to take to improve your score so you can plan to buy sooner than later. You might be closer than you think!
  4. Do you have minimal savings? It is possible to buy a home with as little as 3% down, but don't forget to factor in other costs like inspections, appraisals, and closing costs. You may be able negotiate for the seller to help cover some closing costs depending on the situation, but ideally you should have enough saved to still have money for moving, furnishing the home, and making any necessary repairs with some money left over.  Also, you may want to ask your lender if you qualify for down payment assistance programs.  

    With limited savings, a new construction home or at least a home warranty on an existing home will help shield you from some of the expenses of homeownership. New homes should be covered by warranties and prevent the surprise repair bills that can quickly demolish your nest egg.  

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