Should I Wait to Buy a House?

young couple getting keys to newly purchased house

Buying a home is usually a milestone moment. Not only is it a way to put roots down for your future, but owning a home can build wealth over time—especially if your home appreciates in value.

The housing market has seen a boom in buyers since the start of the pandemic. Total sales of existing homes hit 5.64 million in 2020, a high that hasn't been seen since 2006, according to the National Association of Realtors. However, that doesn't mean that now is necessarily the best time to buy a home. Even if you've got your down payment ready and your credit is in great shape, there are other factors to consider.

The truth is that there isn't one right or wrong time to buy a home, but looking at the big picture can help you determine if you'd be better off waiting or going all in.

Consider the Current Housing Market

Your local housing market will play a big role in whether you decide to buy a home. It's influenced by a number of factors that can have a direct impact on homebuyers. These include:

  • Mortgage rates: When the cost of borrowing money falls, mortgage loan costs generally go down in kind. The opposite is also true. Mortgage rates hit an all-time low during the pandemic thanks in no small part to the Federal Reserve slashing its target interest rate. These lower rates enticed buyers to flood the housing market and snatch up cheaper mortgages. At the time of this writing, weekly average rates for 30-year and 15-year fixed mortgages were both still under 3%.
  • Housing inventory: When fine-tuning your timeline for buying a home, low housing inventory could make it difficult to find a property that meets your expectations. You'll also be up against fiercer competition from other buyers when there's less to choose from. On the flip side, if inventory is plentiful, you could find yourself in a buyer's market. As of March 2021, housing inventory was down 28.2% compared with the same month in 2020, according to the National Association of Realtors. What's more, property took just 18 days to sell on average. This is all evidence of low supply and high demand.
  • Home prices: The national median home price in April 2021 was 17% higher than it was a year earlier—reaching a record-breaking $375,000, according to data. No one knows for certain if and when home prices will fall again, but prospective homebuyers are watching closely. Some may choose to wait until prices (hopefully) come down; others may feel a sense of urgency to make a purchase before prices get any higher.

Ballooning home prices, a reduction in inventory and low interest rates have created a hot housing market during the pandemic, attracting an influx of cash buyers and real estate investors. Meanwhile, more Americans are moving, thanks in part to the explosion of remote work. A recent survey found that 20% more people are planning on moving in 2021 when compared with 2020. This is all to say that a number of factors come into play when deciding whether to buy a home.

Why Now Might Be the Right Time to Buy a House

The complexity of the housing market has likely given you a lot to think about, and there are a few factors you should pay close attention to if you're still on the fence. It may be an ideal time to buy if:

  • You've saved an adequate down payment. Having a 20% down payment has its perks. It eliminates the need for mortgage insurance, sets the stage for a smaller monthly payment, and gets you into your home with a good amount of equity. If that's too steep, it's still possible to buy a home with as little as 3.5% down. Consider your larger financial picture. If you have a decent down payment, now might be a good time to make an offer.
  • You can reasonably afford it. Affordability is about more than just the down payment and monthly mortgage bill. There are also closing costs, homeowners insurance, property taxes and home maintenance—not to mention mortgage insurance if you put down less than 20%. If your budget can easily absorb these costs, and you've built a solid emergency fund, you might be ready to buy a home.
  • You live somewhere where housing prices are expected to rise. If local real estate experts predict a continual uptick in housing prices in your area, getting in sooner rather than later may help you save money in the long run.
  • You're tired of renting. When you pay rent month after month, you aren't building any equity in return. And unlike mortgage payments, rent payments generally don't help your credit since they're unlikely to show up on your credit report.

When You Should Consider Waiting to Buy a House

Not everyone is ready to take the plunge into homeownership. Below are a few reasons to consider holding off:

  • You aren't financially ready. Even if you find a home you think is within your price range, you'll still need to come up with a down payment, plus another 2% to 5% for closing costs. On top of the additional monthly costs mentioned above, experts recommend socking away 1% of your home price per year to maintain the property. If that gives you sticker shock, you may want to wait until you're on better financial footing to buy a home. This includes building a strong emergency fund to cover surprise home repairs and other unexpected life expenses.
  • Your credit score needs work. Every lender is different, but most require a FICO® Score of at least 620 to qualify for a mortgage. If your credit score just makes the cut, you'll likely pay more in interest and loan fees compared with someone who has stronger credit. Taking steps to improve your credit before applying for a mortgage can improve your odds of getting approved and help make your home loan more affordable. 
  • Home prices are expected to drop. Buying a home during a housing bubble can be risky. As demand levels off and supply increases, prices tend to go down. The problem, of course, is that no one can predict when (or if) that will happen. Let your gut and your personal financial situation be your guide. If you're unable to easily take on the expenses that come with homeownership, you may be better off waiting to see if prices come down.

How to Be Sure You're Ready to Buy a House

Here's a checklist to help you determine if you're ready to buy a home, regardless of the current housing market:

  • You have money saved to cover your down payment and closing costs.
  • Your emergency fund is topped off with at least three to six months' worth of expenses.
  • Your credit score is high enough to qualify for a decent interest rate.
  • Your income is such that you can easily keep up with monthly mortgage payments and maintenance.

The Bottom Line

If you do decide that now is the right time, knowing the steps to take to buy a house is your first order of business. This includes figuring out how much home you can afford, finding the right loan program, and getting preapproved for a mortgage before shopping around and making an offer.

This all goes hand in hand with your credit score, which directly impacts your mortgage costs and interest rate. Free credit monitoring with Experian can keep your score going strong by helping you spot issues that can affect your creditworthiness. Your credit reports are available from all three credit bureaus through, so you'll know what lenders will see when you're ready to apply. You can also view your credit report and scores at no charge directly through Experian.