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Mortgage

When Is the Best Time to Buy a House?

Buying a home is just like purchasing any investment: Timing matters, though it shouldn't be the only consideration.

Sometimes you have less choice on when to buy a home, such as when you're expecting a child and want to be settled before she arrives. But if you're flexible on timing, waiting until off-peak buying seasons can save you big bucks—though there are other trade-offs to consider. The best time to buy a house ultimately comes down to what your biggest priority is.

When Is the Best Time of Year to Buy?

Seasonality influences the real estate market significantly, and conventional wisdom says spring or summer is the best—or easiest—time to buy a new home. The weather is better, housing inventory booms, and it's easier to move when the kids are out of school. But the ideal time of year to purchase a home depends on which buying factor is most important to you.

Priority: The Widest Selection

New home listings peak between April and June, and the highest quantity of properties are for sale May through August, according to Zillow. So if your focus is having the largest variety of houses to choose from, spring and summer really is the best time to buy. The downside: Homes are also at their most expensive during these peak months due to the number of buyers on the market.

Priority: The Lowest Prices

If you buy in fall or winter you'll face less competition—and that means you can score better deals. Zillow's data shows that overall, the least competitive months for homebuying are October through December, and late fall and early winter are the best times for budget shoppers. In fact, November is when the fewest homes sell above their asking price. The downside: Because the housing market slows in the fall and winter, you may not have as many homes to choose from.

Priority: A Little of Both

If your budget is a big factor but you have some wiggle room and want a good number of home options, certain months offer middle ground. Mortgage lender Quicken Loans suggests that buying in late summer or early fall can be ideal since prices usually start to decrease from peak summer season, but there's still a decent amount of inventory left. According to Zillow, the month of August has the most price cuts while still having healthy inventory levels (less than spring, but enough to still give you some options).

The Most Expensive Time to Buy a House

Homes are typically most expensive between March and May, according to data from Zillow. Because the warmer months are the most popular time of year for homebuying, competition is steep during this time and buyers are more likely to pay above asking price.

With more buyers in the market, you're more likely to encounter bidding wars or watch homes get snatched up before you have a chance to view them. There is a silver lining, however, if you're trying to sell your current home at the same time you're looking for a new one: You're likely to get a better price for the home you're selling during this time.

Why Economic Conditions Could Be Important

Another factor to keep in mind for timing your home purchase is what's happening in the economy. For example, in a recession, regardless of the time of year, real estate markets often turn into buyer's markets where homebuyers have the advantage. Additionally, the Federal Reserve often lowers interest rates during downturns, which results in cheaper mortgages.

An economic recession could also translate to lower price tags on homes, and you could face less competition from other buyers. For a homebuyer in good financial shape, these factors can result in big savings. The downside of buying during a recession is that lending requirements may be tighter, so your credit and financial health need to be in solid shape.

Focus on Your Priorities

Ultimately, the best time to buy a home is a personal decision and should be focused on what's most important to you. Is your priority to get into a new home as fast as possible? Then trying to time the market doesn't make sense, and you shouldn't fret about seasonality of the market.

If you're looking for the best deal and aren't in a rush, you may want to pay attention to timing and wait for the off-peak homebuying season in the fall and winter. If having the most inventory to choose from is most important, even if prices are a little higher, you're best off waiting for spring or summer.

Making Sure Your Credit Is Mortgage-Ready

When you apply for a mortgage, the lender requires significant amounts of documentation about your financial health, such as your income, debts and assets. They will also check your credit report, which not only helps determine your eligibility for a mortgage but, if you're approved, what your interest rate will be.

Going into the mortgage application process with a higher credit score can land you a lower interest rate and save you thousands of dollars over the life of the loan. That's why it's wise to spend at least a few months getting your credit ready for a mortgage before you apply. This includes ensuring you make all debt payments on time, pay down credit card balances and check your credit report to ensure all the information is accurate.

Get Preapproved First

Before you start viewing homes, it's recommended to get preapproved with a lender. This entails starting the application process, submitting all the required documentation and agreeing to a credit check. The lender will review everything and, if you're preapproved, you'll receive a letter stating how much you're preapproved to borrow and what your loan terms would be. This doesn't commit you to accepting any offers, and you can do this with multiple lenders to compare rates and terms.

One benefit of preapproval is that it helps you understand how much home you can afford, so you know what price range of properties are within your budget.

It also indicates to the seller that you're a serious buyer who has already been screened by a lender. If you're in a competitive market or season, and multiple buyers submit offers, those with preapproval letters may be favored since they've already taken this important first step.

This is different from getting prequalified, which is less rigorous and typically doesn't require a credit check. Instead, you submit some basic information and get an estimate of how much you could potentially borrow. Prequalification is better than nothing, but getting preapproved is preferable since it gives you a more accurate budget and can help you close a deal faster.

Get Familiar With Your Credit Now

Not sure where your credit currently stands? Before you begin the process of applying for a mortgage or shopping for a home, we recommend checking your credit and keeping an eye on it for at least a few months. It's free to monitor your credit with Experian, which enables you to track changes in your score and learn how to improve it. While this can take a little extra effort, it can help improve your chances of getting approved for a mortgage, and at a competitive rate that translates into significant savings in the long run.