5 Signs You're Ready to Buy a Home in 2021
Home prices are up this year, but if these things apply to you, you may be in a good position to buy anyway.
Home prices have been soaring since the start of 2021 as limited inventory and low mortgage rates have driven an uptick in buyer demand. Recently, the S&P CoreLogic Case-Shiller Index reported that home prices were up 19.7% in July compared to the year prior. That's a tremendous hike, and one that many buyers can't afford.
While many buyers are getting priced out of the real estate market, that doesn't mean it's not feasible for you to buy a home this year. Here's how to know if you're in a good position to take that leap.
1. You have a 20% down payment for a home
These days, it's harder to come up with a 20% down payment on a home because doing so requires you to bring more money to the table than you would've in the past. But if you've researched home prices and know you have that down payment on hand, then you're in a strong position to buy.
Of course, many mortgage lenders will accept a lower down payment for a conventional loan. But if you don't put down at least 20% of your home's purchase price at closing, you'll be hit with private mortgage insurance, a costly premium you'd probably rather avoid.
2. You know what monthly mortgage payment you can afford
Having a lot of money in savings for a down payment is a good step toward being ready to buy a home. But it's equally important to have crunched the numbers to make sure you can swing your monthly mortgage payments.
Remember, even if you're bringing a large amount of money to your closing, home prices are up significantly this year. It's important to do the math and make sure your mortgage payments won't bust your budget.
3. Your credit score is in good shape
A big reason so many people want to buy a home this year is that mortgage rates are sitting at attractive levels. If you want to qualify for a low interest rate on a mortgage, you'll need a solid credit score. If yours is in the mid- to upper-700s or higher, there's a good chance you'll be eligible for the best rates any given lender is offering.
4. Your existing debt load is manageable
The less debt you have, the easier it'll be to work a mortgage payment into your budget. If you're not carrying a lot of credit card debt and don't owe much in the way of outstanding loans, then you may be in a great spot to take on housing debt -- which, incidentally, is the healthier kind to have.
5. Your job is nice and stable
Although the economy is in much better shape now than it was at the start of 2021, it hasn't fully recovered from the blow the pandemic dealt it. If your job is stable despite the upheaval of the past 20 months, then you should feel more secure moving forward with your plans to buy.
While there's a good chance mortgage rates will remain competitive in 2022, right now, they're still really low. That's reason enough to try to buy a home before the end of 2021. Just make sure you can check off the above boxes before making a seller an offer and putting in a mortgage application.
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