With interest rates likely heading upward, many prospective homebuyers are rushing to lock in mortgages before borrowing becoming even more expensive. While snagging a lower interest rate is likely to make your monthly payments cheaper and help you save money in the long term, buying a house right now might not be the best move.
Here are a few situations where you would be better off waiting:
1. You are new to your job
First, if you do not have an established payment history, you might have trouble getting approved for a mortgage in the first location. Even if you’re approved, you might want to wait a couple of months and ensure that your new role works out before choosing the fiscal responsibility of owning land.
If you’re going to be stuck in a job you do not like there’s nothing worse than havin to pay your mortgage payments. You are far better off doing things slower and making certain your job situation is actually secure before committing yourself to a mortgage.
2. You can not afford the deposit
While you do not necessarily need to make a 20% down payment to buy a house, if you do not save that amount, you are going to face what might be a somewhat long-term consequence: private mortgage insurance (PMI).
PMI is paid as a monthly premium in addition to your regular mortgage payment, and it is typically calculated as 0.5 percent to 1 percent of the worth of your mortgage.
Should you take out a $250,000 mortgage at 1 percent PMI, you will spend an additional $208 per month to reside in your dwelling. If you can not afford to place 20% back on your house, you might want to wait a couple of years, save aggressively, and purchase at a stage where PMI won’t come into play.
3. Purchasing a house will wipe out your savings
Though everyone requires an emergency fund, having additional reserves is particularly crucial for homeowners. That’s because once you buy a house, you never know what hidden cost is lurking where you would least expect it.
If you do not have enough in the bank to pay a deposit on your house whilst also retaining sufficient to cover three to six months of living expenses, you would be prudent to think about holding off until you have more in savings.
Imagine you use all of your savings to purchase your house and encounter a $10,000 repair a few months afterwards.
Without an emergency fund, you will most likely don’t have any option but to take on debt to pay that cost. Even if nothing really goes wrong with your house, you never know when you may fall ill, get hurt, or experience another scenario where you are out of work for weeks at a time.
If you do not have emergency savings in place, you will risk not only racking up debt but rather possibly losing your dwelling. And that is not a risk you wish to take. If you move forward with purchasing a house, do not make the mistake of rushing through the process.
Ultimately, while no one wants to pay more attention than necessary, bear in mind that today’s prices are still fairly competitive, particularly in contrast to what prices looked like in years past.
Whether you choose to obtain a mortgage this month, the next month, or six months after that, provided that your credit is good, you are very likely to snag a rate that is still pretty darn appealing.