Knowing the right time to buy a home

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When it comes to trading on the stock market, timing is everything: prices can change in a matter of minutes and profits can soar (or disappear) depending on when you decide to buy or sell.

But when it comes to buying a home? Timing can be trickier. Not only do you have to consider current mortgage rates, but you have to make sure that your debt, your income and your credit score are in tip-top shape before you apply for a mortgage. Oh, and let’s not forget the actual process of finding a home, putting in an offer and closing the deal. Overall, buying a home can be a very lengthy process and the “ideal” timing for starting the home buying search can depend on many factors.

So how do you know when it’s the right time to buy a home? There are a few things you’ll want to consider to help you figure out the timing:

Your finances: If you’re currently a renter, you’ll first want to make sure that you’ll be able to afford a mortgage payment and any additional financial obligations that come with a house (think property taxes and water/sewage). Similarly, you’ll want to make sure that you have at least 20 percent saved up for a down-payment for a home in your price range. If you’re in good shape with your down payment and feel like you can handle the monthly costs associated with a home, you might be ready for a home.

Your mortgage rate: You’ll want to consider what current mortgage rates are like and where your credit history and income-debt ratio stand. Depending on the market and your current financial situation, the timing could be ideal and you could get a great rate on a mortgage.

Your future plans: Finally, you’ll want to consider your future goals. If you’re planning on sticking around your current town or city for the foreseeable future, buying a home may be a great decision. But if you’re not sure where you’re going to live or where you want to live in the next couple years, buying a home may not be the smartest move.

About Stephanie Halligan

Stephanie is the founder of The Empowered Dollar, a site dedicated to helping millennials to fix their finances and find their stride in money and life. When she's not blogging, Stephanie is designing school curricula and online games to teach students about smart money management.

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