black and white keys reflecting decision: should I buy a house?

Should I Buy a House? 9 Keys to Confidence: A MoneyTips Guide


What You Need To Know

  • Deciding to buy a house takes confidence in your financial situation and knowing what kind of lifestyle you want
  • Your debt-to-income (DTI) ratio and credit score can affect whether you get approved for a mortgage loan and the loan terms lenders offer
  • You don't always need a 20% down payment to get a mortgage loan – with good credit, your down payment can be as low as 3%


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Determining Your Credit Score
  1. Your credit score is a three-digit number that’s used to predict how likely it is you’ll pay back money you borrowed.
  2. The score generally ranges from 300 (low) to 850 (excellent). It’s calculated by looking at your previous credit history.
  3. You can check your credit report to find the number or use a free credit tool. You can also plug in your best guess.

It’s 💯 okay if your credit score isn’t perfect! Wow ⭐ looks like you’re in great financial shape!

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Knowing when to buy a house comes down to two key things: how bad you want it and how financially prepared you are to pay for it.

Here’s a common scenario: Your heart says, “Go on, make the dream real!” But your head demands proof that you’re not about to blow up your budget.

It’s smart to be thinking that way. The better position you’re in when you buy a house, the less stress you’ll feel and the happier you’ll be with your purchase.

But you probably have questions about what comes between deciding to buy a house and deciding where to put the leather love seat in your new living room. Well, we’ve got answers! 

Let’s explore the possibilities. 

Should I Buy Now or Wait? 9 Questions To Ask Yourself

There’s no stock answer to the question of when to buy a house. But here are some questions you should ask yourself before deciding to buy: 

  • Is it worth it for me to buy a house in the current real estate market?
  • If the market’s competitive, will it be harder for me to find a home I can afford?
  • If I buy now, is my home likely to gain or lose value over time?
  • Am I at a place in my life and career where I can settle down for a while?
  • Is my financial situation stable enough for me to qualify to buy a home? 
  • What will my debt-to-income (DTI) ratio and credit score look like to potential lenders?
  • Can I afford a down payment (the percentage of the home sale price you pay upfront to buy a house)?
  • Does it make more sense to buy a condo or single-family home?
  • Will I have enough money to cover all the costs of being a homeowner?

If you’ve been flipping through these questions in your head, we can help you find answers.  

How’s the Real Estate Market?

If you want to buy a house right now, you need to think about two things: timing and location.

Home prices go up and down based on everything from the time of year to the local housing market to the state of the global economy. These forces can affect everything from the price and availability of homes to mortgage interest rates.

What time of year is it where you are?

In most real estate markets, demand is high or low depending on the season. In the Northeast, for example, buyers tend to be more active during the spring and summer. And that makes sense. The days are warm and long and it’s easy to get around and attend open houses. But, buyers tend to hunker down and stay indoors during the fall and winter – when the days are short and cold, and icy roads make looking at homes uninviting.

Looking farther south, you might see the opposite. The demand for homes may spike in January and February as buyers from the Northeast look for a warm home where they can escape winter.

What are interest rates?

Lenders charge mortgage interest rates (think: what a lender charges to borrow money) based on current market interest rates. When market interest rates are low, mortgage interest rates usually are, too. But, lower interest rates can encourage competition in the housing market, which can inflate home prices.

What’s happening in the local housing market?

If you’re looking to buy in a popular neighborhood, you may be thinking that home prices and values will rise in the future. That may be true, but that also means the housing market might be ultracompetitive. If that’s the case, prices in that neighborhood will probably be higher, making it harder to find an affordable home.

On the flip side, if you find an area with lots of homes for sale and not enough buyers, it could be a sign that the area is in decline. You should approach buying a home in areas where home values are falling with caution. 

While you could negotiate a lower price for a home, the value of your home could continue to drop and make it harder to sell in the future.

Is It the Right Time for You?

Depending on your lifestyle, financial situation and how long you plan to stay in one place, buying a home can be a better investment than renting. 

If you stay in your home long enough, usually around 5 years or longer, you can build up a good amount of home equity (the difference between what you owe on your home and the value of your property).

However, if you sell your house after 2 years, you could owe extra taxes that eat into what you earned from the sale – we’re talking thousands of dollars.  

Before you buy, it’s a good idea to take stock of your life – and your lifestyle. 

  • Where do you see yourself or your family and career in 5 years?
  • Do you think you’ll need to move for work or other reasons?
  • Are you planning to buy a home by yourself or with a spouse or partner?
  • Are you having children or planning to have children? Would you consider sending your child to any of the schools in the area? 

Can You Count on Your Income?

Do you know what mortgage lenders love to see? Mortgage lenders love to see that borrowers have steady, reliable incomes. 

So, if you don’t see yourself staying in your current job much longer or you’re thinking about changing careers, you may want to wait and see how much your income changes before committing to a mortgage.

Taking time to save to buy a house might make money sense if you’re not sure about your future income. TBH, it’s better than stressing out over making ends meet or staying at a job you don’t like to pay your mortgage. And here’s another bonus: Waiting gives you more time to save for a larger down payment.

If you’re curious and want to estimate monthly mortgage payments, use our mortgage calculator to run a few numbers. (Tip: Click on “Advanced Options” to put in your credit score.)

Mortgage Calculator

How’s Your Debt-to-Income (DTI) Ratio?

It’s common knowledge that lenders prefer a low DTI (read: how much of your pre-tax income goes to paying off your monthly debt). Your fixed monthly debts can include: 

  • Rent or mortgage payments
  • Car loan payments
  • Credit card minimum balances
  • Personal loan payments
  • Student loan payments

DTI requirements will vary from lender to lender, but they’ll usually want to see a DTI under 45%.[1]

A healthy DTI is a promising step toward loan approval. The lower your debt, the better loan terms lenders may offer – and that includes lower interest rates.

Some debt isn’t necessarily a deal-breaker. And you can even work around student loans. 

But if your DTI is high and you’re not feeling confident about piling a mortgage on top of your bills, it’s okay to step away from your bookmarked real estate websites and work on paying down your debt. 

Do you know what your DTI is? If that’s a no, we have a DTI calculator you can use to figure it out. 

How’s Your Credit Score?

Lenders will also look at your credit score. It’s a three-digit number from 300 – 850. The score measures your creditworthiness (think: how reliable you are at paying back debt). 

Most of us get our credit scores from three major credit agencies, TransUnion®, Equifax® and Experian™. The closer your score is to 850, the better your credit. For most conventional loans (non-government backed loans) you’ll need a minimum credit score of 620. 

The higher your credit score, the lower your mortgage interest rate is likely to be. Basically, it’s cheaper to borrow money when you have a high credit score. 

You’ll save tens of thousands of dollars in interest over a 15- or 30-year mortgage. Cha-CHING!

If your credit score is below 620, there are still loans out there for you. You may qualify for a loan through the Federal Housing Administration (FHA). Borrowers with credit scores of 580 or higher can qualify for an FHA loan with a 3.5% down payment. If your credit score is between 500 and 579, you’d have to make a 10% down payment for an FHA loan.[2]

Keep in mind that FHA loans tend to charge more in interest, and they require mortgage insurance premiums (MIPs) – even if you can make a 20% down payment on the home.

If your credit score doesn’t meet the qualifying threshold of the loan you’re interested in, take some time to improve your score by paying down debt – especially high-interest credit card debt.

What Size Down Payment Can You Afford?

While you’re figuring out how much to put toward your down payment, you should be thinking about the other costs you’ll be paying around the time of purchase, like closing costs, movers, utility deposits, etc.

Will you have enough money left over to comfortably afford a down payment that’s at least 3% of the price of the home? 

Most lenders can require as little as 3% down for a conventional loan[1] and 3.5% for an FHA loan.[2] But the closer you get to the standard 20% down payment, the more likely you are to enjoy:

  • A smaller loan
  • A lower mortgage rate
  • No private mortgage insurance (PMI)
  • Less interest paid over the life of the loan
  • An edge over other buyers in the eyes of the seller

If you’re coming up short on the down payment, ask yourself if it’s worth it to buy now or give yourself some breathing room and cash reserves to comfortably spend on a house later. 

If you’re determined to get a home now and your only serious money hurdle is the down payment, consider asking friends or family to pitch in with “gift money” to help cover what you need. Ask your lender to explain the rules around gift money.

Should You Buy a Condo or a Single-Family Home?

Condos can be a great starting point for homeownership. You get all the benefits of homeownership with the conveniences of apartment living. IRL, that looks like owning your place, but not having to worry about fixing busted plumbing or shoveling snow because maintenance takes care of that. Add a gym or pool to the list of condo perks, and what’s not to like? 

If you’re on the fence about buying a home, consider a condo. Condos are shared living communities. You buy an individual unit but share the ownership and management of the building with a condo association made up of all the owners.

Just keep in mind that condos:

  • Charge monthly condo association fees that can go up quickly, as well as special assessments to cover repairs and renovations
  • Tend to appreciate (gain value) slower than single-family homes
  • Are considered higher-risk when compared to single-family homes, so lenders may require a higher down payment and qualifying credit score
  • Are ineligible for many first-time home buyer programs and low down payment loans

And selling your condo or using it as an investment property may depend on the condo association’s rules. 

Can You Afford To Be a Homeowner?

Once you’ve bought a home, you’ll need to be ready to cover the costs of homeownership. And that goes beyond paying for your mortgage, property taxes and insurance. You should be ready to cover costs like:

  • Moving expenses 
  • New furniture and appliances
  • Necessary renovations and improvements before you move in
  • Repairs and maintenance
  • Utility bills (they tend to be higher for homes)
  • Landscaping and upkeep of the property around your house

If you live in a condo or a home that belongs to a homeowners association (HOA), you’ll pay a monthly fee, too.

Still Wondering When to Buy a House?

Check out these yes or no questions. See if the right choice for you (and your budget) is to buy a house right now or when the time – your money – is right. 

  • Are you looking to buy in an area where your home will build value over time?
  • Will your career and/or family life let you commit to a location for 2 – 5 years?
  • Do you have good credit and a healthy balance of debt and income?
  • Can you afford a down payment of at least 3%?

If you answered yes to all those questions, congrats! It looks like you could be on your way to homeownership. 

Before you can officially bid rent farewell for good, start your home buyer’s journey with these steps:

  • Research mortgage lenders to see about getting preapproved
  • Set up a few casual chats with real estate agents
  • Talk to a financial advisor or debt counselor about improving your finances
  • Learn more about first-time home buyer programs and down payment assistance programs
  • Figure out if you’ll need to talk to family and friends about gift money for a down payment 

Buying a home is a huge milestone that, honestly, many of us aspire to meet. But it shouldn’t come at the cost of anyone’s financial health and financial goals. Waiting to buy a home until you’re financially ready can potentially save you thousands of dollars – and it won’t cost you your peace of mind.

  1. Fannie Mae. “ELIGIBILITY MATRIX.” Retrieved January 2022 from

  2. U.S. Department of Housing and Urban Development. “Section C. Borrower Credit Analysis Overview.” Retrieved January 2022 from


In Case You Missed It

  1. Lenders prefer a credit score of 620 and a DTI of 45%, but there are exceptions to the rule

  2. A steady income and 6 months of expenses saved are good indicators that you may be ready to buy

  3. Don’t hesitate to ask family and friends, real estate professionals, lenders and financial advisors for advice before you decide to buy a home

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