4 Signs You Shouldn't Buy a Home in 2022

Tread carefully if any of these apply to you.

There are plenty of good reasons to own a home rather than rent one, like the chance to build equity in an asset that could gain value over time. If you've had homeownership on your radar for quite some time, you may be eager to buy in 2022.

Mortgage rates have been sitting at or near record lows since mid-2020, but in early 2022, they started climbing. You may be eager to buy a home before rates rise even more. But while that logic makes sense, if these situations apply to you, it's a sign you may want to postpone homeownership.

1. You have a lot of debt already

Owning a home means taking on a monthly mortgage payment, among other expenses. And so if you already have a lot of debt to pay off, you may want to wait until some of it is whittled down. Not only might your existing debt make your mortgage harder to keep up with, but having too much debt relative to your income could result in you being denied a home loan.

2. Your credit score needs serious work

It's possible to get a mortgage with poor credit. But in that case, you may be limited to an FHA loan, which comes with certain restrictions and drawbacks (like having to pay ongoing mortgage insurance premiums). If your credit score isn't great, it may be a sign you're having a hard time managing your bills and debts. It could pay to hold off on adding another expense to the mix until you're in a more secure place.

3. You're going freelance

A lot of people have left their salaried jobs and gone freelance in the course of the pandemic. Doing so could be a wonderful career move for you. But it could also mean going from a steady income to a variable one, and/or taking a pay cut until you ramp up your workload. As such, you may want to wait on buying a home until you're settled into your freelance routine for a good six months, if not longer. That way, you may have a better sense of what your income looks like, which will help you determine how much house you can afford.

4. You lack funds for a down payment

You don't necessarily need a 20% down payment to buy a home. Some conventional mortgage lenders will let you put down less, but if you go that route, you'll be charged private mortgage insurance, which will add to your costs. Similarly, you can get an FHA loan with as little as 3.5% down, but then you'll face the ongoing mortgage insurance premiums we talked about earlier. You may want to wait until you have more cash socked away before buying a home.

Eager as you may be to buy a home in 2022, especially before mortgage rates jump, it's important to do so under the right circumstances. If any of these signs apply to you, you may be far better off sitting tight and waiting to buy.