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Buying a Home: When to Make Your Move

house

Some say avocado toast is holding young people back from becoming homeowners, but, of course, it’s not that simple. There are many factors that go into the decision to buy a home. Finances, timing, the real estate market and the economy, to name a few.

While there’s no one-size-fits-all approach to buying a home, these tips and tricks can help you determine if the time is right to make your move.

When to Buy:

  • You’ve built a solid savings. Specifically, you’ve put away enough to cover your down payment and the first few months’ mortgage payments. With a healthy cushion of savings already in place, you can make your move and feel good doing it. The first step: Apply for mortgage preapproval. That way, you can act fast when the time is right.
  • You’re close but not quite there yet. Most down payments are between 3–20 percent of the sale price, but waiting to save that magic 20 percent isn’t necessarily the best option. You may spend the same amount or even less in the long run if you make a smaller down payment up front. Why? Because homes generally increase in value over time, which means the longer you wait, the more you’ll have to save to reach 20 percent. If the cost of living in your area is high, it may be in your long-term interest to make your move sooner rather than later. And of course you don’t have to do the math alone. Summit can help you figure it all out.

When to Wait:

  • Debt or other expenses have held you back from growing your savings. Between credit cards and loan payments, debt can add up quickly. Your first priority should be paying down debt. Then, you can start to build up your savings gradually. Put a little bit away each month, and you’ll be ready to make your move in no time (OK, maybe a little time). A savvy saving tip is to create a specific sub-account right within your main savings account to put toward a future down payment. Earmarking this money for your future home can help you stay motivated to keep saving every month.   
  • You aren’t quite ready to settle down. In those first few years when you’re building your career, relocation is common. Or maybe you want to try another new city before you set up camp in a long-term home. If you’re not ready to lose your flexibility, the stability of a home is not the best option for you right now. It is recommended that you plan to stay in the area for at least three to five years when buying a home. Considering all up-front expenses when moving, updating a home and paying a realtor, it is worth staying in the home at least a few years to truly enjoy all your hard-earned savings put to work.

BUT, there are things you can do to get ready to buy a home … someday:

  • Consolidate your debt. Depending on your situation, consolidating debt can lower your interest rates and may even result in a lower monthly payment. Plus, with one easy payment, you can stop putting your hard-earned money toward late fees.
     
  • Develop a savings strategy. Honing your smart money habits will pay off in the long run. This is a great time to revisit your monthly budget and see if you can put a little more toward savings. A good rule of thumb is to save about a third of your monthly income. You can set up automatic savings contributions through Summit right from your monthly paycheck, so you won’t even have to think about it.

Not sure?

  • Apply for mortgage preapproval anyway. If you think you may buy a house in the near future, Summit financial advisors can help you figure out if the time is right, and, if so, how much you can afford to spend. Plus, preapproval will give you more credibility when it comes time to make an offer. Summit is the #1 mortgage lender in Dane County, and we’re always here to help – whether it’s time to make your move or not.

Buying a home is a big decision and an even bigger investment, and we can talk through all your options together. But whatever the verdict, we say go ahead and enjoy your avocado toast.