The truth is that many problems contribute to low black homeownership statistics and homeownership rates. Yes, inequalities and racial disparities exist in the housing industry. But improving the black homeownership rate is still important, necessary, and attainable. Let’s take a look at the statistics and what we can do about them.

Why is black homeownership so important?

Becoming a black homeowner and understanding black homeownership statistics is about more than just a home purchase. It’s about laying a foundation for building generational wealth. In addition to being one of the biggest wealth-building assets, it’s also the base for family and financial security.

Here are more specific details about why it’s absolutely worth striving for.

Black homeownership helps build generational wealth

Looking back now at how history is affecting the present, early Black Americans had tremendous difficulty purchasing land and homes in the United States. And unfortunately, this has impacted how easy it is to leave a legacy to future generations.

Passing down a home is just one way that black families can begin to build generational wealth. Without a house as a key asset, each generation must find other ways to acquire enough wealth to leave to their children.

Owning a home provides financial options

A home can be your main vehicle for building wealth and increasing and tracking your net worth. And net worth is a goal worth improving.

But sadly, single black women have one of the lowest rates when it comes to net worth. How can this be changed? One way to close this racial wealth gap is by investing in real estate.

So, what’s the draw of being a first-time homebuyer? Well, for one, you can build home equity which can provide you with more financial options in the future. And you can use this equity in numerous ways.

Perhaps to pay off debt, increase your savings, or invest? Current homeowners can even buy a new home of greater value.

Another way to increase your net worth is to keep your home so it appreciates in value. Its value will increase over time. With this in mind, a home can be one of the greatest methods of wealth creation.

Homes provide safety and community

The benefits of homeownership go further. Not only does owning your own home provide a foundation for wealth building, but it’s also important for families.

A home is a safe space where families can grow and is the cornerstone of communities. A neighborhood filled with homeowners rather than tenants will have pride in their property and the local area.

Black homeownership statistics

Now, let’s examine the numbers and percentages to see how homeownership, income, and other factors affect Black Americans.

Percentage of Black Americans who own homes

Recent data from Census.gov reveals some information about black homeownership statistics:

• In the United States, Black or African American homeowners accounted for only 7.9% of the population, while black renters accounted for 18.8%.
• White households reached a percentage of 73.1% homeowners, with renters at 50.2%.
• The other largest categories of homeowners were Hispanic Americans at 10.5% and Asian Americans at 4.7% for homeownership.

This list reveals significant differences in homeownership. There is a much higher percentage of white families who own their homes compared to black families as well as families of other races.

In addition, the amount of black renter households is much higher than those that own their home.

The data is cause for concern, but we will discuss ways to improve these statistics for Black Americans. Let’s take a look at other factors that affect homeownership rates.

Incomes and other factors

Income affects our everyday lives, including how high of a mortgage payment we can afford. Because of this, it’s crucial to know about income statistics.

According to Census.gov and their chart about real median household income, Black Americans make an average of $52,860 per year.

An average salary of approximately $53,000 may make it difficult to afford a mortgage, depending on circumstances and location. This salary is approximately $4400 a month before taxes, and the median monthly mortgage payment is over $2200, according to Bankrate.

Location also shows differences in black homeownership statistics.

For example, according to the National Association of Realtors (NAR):

• The states with the highest black homeownership rates are South Carolina, Mississippi, and Delaware.
• North Dakota, South Dakota, and Alaska had the lowest rates.
• Including Washington DC, 16 states rated homeownership as higher than 44%.

Why black homeownership statistics are disproportionately low

But black homeownership statistics are still incredibly low. Why? Let’s take a closer look at housing equity and the factors that contribute to the disproportionately lower rate of homeownership for Black Americans.

Lending biases and interest rate disparities impact opportunities for black homebuyers

Housing discrimination is a practice that impedes the ability to rent or buy housing. It also prevents people from getting a mortgage or other housing-related activities. Discrimination is based on race, religion, sex, and other identifying factors.

Redlining was a form of mortgage discrimination or bias. It allowed lenders to deny mortgage loans to people living in areas that African Americans densely populated.

The Fair Housing Act was passed in 1968 to make such practices illegal. Other efforts have been made to undo these years of discrimination in the housing market, such as the Home Mortgage Disclosure Act data, which promotes lending transparency.

However, the effects of these practices still exist. Even today, they still impact homeownership rates.

Another form of home-buying discrimination is the disparities in interest rates.

According to Housing Matters, black homeowners on average are charged a higher interest rate by mortgage firms than white homeowners due to risk based pricing with credit and loan-to-value ratios.

Additionally, African Americans are more likely to be denied a loan. Statista shows that black households have the highest denial rates for mortgages from 2019 to quarter 3 of 2023.

One reason for this may be a lack of information for first-time homebuyers. Black mortgage applicants may not always be aware of the various programs that exist to help them become homeowners. And this continues to put black families at a disadvantage when it comes to acquiring lending.

Disproportionate debt load within the black community

Something else that affects black homeownership statistics is Black American households also have higher debt than other ethnic groups. Specifically with the student debt crisis.

Black students take out the most student loan debt, according to Bankrate, when getting a bachelor’s degree. Bankrate also explains that this has quite an impact following graduation.

Four years after finishing college, black students have nearly double the quantity of student loan debt that white students have. However, this is mainly due to the differences in interest accrual and borrowing money for graduate school.

Debt directly affects home buying. Why? Too much debt could mean lenders decline your mortgage application due to the risk of default.

Debt makes it hard to gain the funding required to buy a home.

Additionally, wage gaps for minorities and women also negatively impact your ability to pay off debt. Again, this makes it more difficult for black borrowers to get a mortgage.

Lack of access to capital for a downpayment

When you buy a home, you need to put down capital as a down payment for the property. Usually, this means saving hard to create this down payment for your future home. But the ability to save enough depends on how much you earn.

And this is another area where Black Americans are at a disadvantage. The annual median wage of all US workers is $42,000, but 43% of black workers earn less than $30,000 per year, according to McKinsey research.

In addition, many families live paycheck to paycheck, unable to even save for emergencies. One study found that most Americans have less than $1,000 in savings.

The result? Some people struggle to earn enough to save for the down payment of a home.

Expert tip: Don’t be discouraged, you can own a home

With all the negative statistics around black homeownership, it can be discouraging to think about owning it a home but it is possible and black homeownership is rising.

That said, it’s important to start saving for your any required home downpayment depending on where you plan to buy and the type of mortgage you qualify for as a first-time homebuyer. The down payment for a home is usually a large expense, but don’t forget that there are also other costs and fees to save up for.

When I was considering a home purchase, I also thought about HOA fees, property taxes, and maintenance costs. These are part of homeownership, so be sure to consider them in your budget before looking to purchase a house. You’ll also need to consider moving costs once you purchase your home.

Steps to improve black homeownership statistics

Ongoing work continues to level the difference between black and white homeownership rates. But in the meantime, there are ways to make housing affordability more likely. Let’s take a look.

Focus on getting financial education

First, focus on financial literacy basics, including budgeting your income. Budgeting means creating a plan to save, reduce debt, invest for the future, and pay bills.

Need some support? Check out our Clever Girl Finance Roadmap. You can also take advantage of our completely free personal finance courses.

Work to reduce debt

As we’ve discussed, debt impacts your ability to purchase and maintain a home.

So before buying a home, work to reduce your debt using a tactic like the debt snowball method. Ideally, you’ll have zero, but if not, try to pay down as much as possible.

Lenders evaluate your debt-to-income ratio. They want to know how much you earn each month and how much of that goes towards paying down your debt. It helps them determine your ability to make your monthly payments.

So, if you have too much debt compared to your income, this could reduce your likelihood of getting approved for a loan. Or it could mean you cannot borrow as much as you need for the home you have your eye on.

If this is a problem for you, consider these debt reduction strategies for attacking your debt.

Begin to prioritize savings (not just for a down payment)

Now that we’ve discussed black homeownership statistics, take steps to secure your financial future before buying a home. Having money saved for emergencies and retirement is necessary for financial stability. So, prioritize this before thinking about saving for a down payment.

But saving on a tight budget can be difficult, so there’s no harm in starting small. Every little contribution you make is a step in the right direction, which eventually adds up. Once you’ve saved for emergencies and put money toward retirement, start saving for a house down payment.

Improve your credit

Unless you’re a cash buyer, you must take out a home loan to buy a property. And credit plays a significant role in getting a home loan.

If your credit score is low, improving it will increase your chances of getting approved for a loan. And better yet, you’ll be eligible for loans with better interest rates.

So, what does your credit score include? Lenders will likely look at several factors, such as your credit utilization, payment history, and credit history length, in addition to other factors like credit mix.

Before applying for a home loan or any other type of loan, it’s essential to know how credit works and how these factors impact your credit score. From here, you can regularly monitor your credit and take the necessary steps to improve your score.

Research the mortgage and lending process

It’s important to know what to expect in a real estate transaction. Loan applications and the mortgage process involve a lot of paperwork.

Be aware of the steps you’ll need to take before purchasing a home, as well as how much house you can comfortably afford to buy.

According to Rocket Mortgage, you’ll need to have information about your job history and what you earn, your credit, and more. They also explain that the process includes a preapproval, an approval letter, and making an offer on a home.

In addition, find out what the cost will be for a median-priced home where you’d like to live. Numerous costs are involved besides the typical home price, including home appraisal/inspection, the cost of furniture, etc.

What is the racial homeownership gap?

The racial homeownership gap refers to the differences between homeownership by race. For instance, there is a large gap between the number of white homeowners and black homeowners in the United States.

As of 2022, the homeownership rate for white homeowners was 75%, compared to 45% for black homeowners, according to the U.S. Department of the Treasury.

What are the barriers to homeownership for minorities?

Some of the barriers for minority home buyers include lender biases tied to higher interest rates.

In addition, income can also be a factor, as lower incomes do not allow potential homeowners to save up a large down payment. Black Americans on average have lower incomes, making saving difficult.

These factors can be daunting, but together, we can all advocate for fair practices with mortgages.

Furthermore, budgeting and consistent saving can help with being financially prepared for a home.

What are the benefits of black homeownership?

Some of the benefits include the ability to build wealth over time with your house as an asset, especially with home improvement, and the option to make rental income if you want.

A house also provides you with security. Once your home is paid for, it gives you a permanent place to live and contributes significantly to net worth.

Articles related to homeownership

If you learned something new from these black homeownership statistics, read these posts to learn more about home buying and finances!

• Should I Buy A House Now Or Wait?
• Is A House An Asset Or A Liability?
• 13 Personal Finance Books By Black Women
• Advice For First Time Homebuyers: How To Prepare

Black homeownership is within reach

The statistics may not seem promising. But the truth is that homeownership is still attainable for black families. Becoming a first-time buyer is an excellent goal to have. Owning a home provides a legacy to future generations and helps build the foundation for generational wealth.

So, if your ultimate goal is to purchase your home, don’t let black homeownership statistics scare you. We can and will close the black homeownership gap with the right education and tools.

What’s next? If you’re ready to purchase your first home, check out our free first-time home buyers course and you’ll be starting on the right path!

The post Black Homeownership Statistics And How Things Can Be Improved appeared first on Clever Girl Finance.

The idea of building a home might seem like a dream come true because you can fully customize the space. But buying a home already built also has its benefits, like being move-in ready right away. You may find yourself wavering between the two as you consider costs, so is it cheaper to build or buy a house?

Although you may want to build your dream home, you need to consider the cost of building.

In some cases, buying a house can make a lot more sense.

There are many things to consider when building, such as building materials, labor shortages, and the plot of land you buy.

On the other hand, purchasing a home means you need to consider the layout of the house and potential repairs.

How do you choose? While there are many factors to think about either way, including the real estate market, we’ll discuss which option is cheaper, as well as the advantages and disadvantages of each. And remember, loving your home is totally possible, whether you build or buy!

Is it cheaper to build or buy a house?

In some areas, it might be more affordable to build a home, but in most, you’ll find it is cheaper to buy an existing home.

According to an article from Bankrate with data from the National Association of Realtors, the median cost for an existing home in the United States, not one you are building, is $375,700 in 2023.

However, U.S. News reported on data from Real Estate Witch that the median cost of building a house in 2023 is $446,000, which doesn’t include the cost of purchasing the land.

Based on this, it is cheaper to buy an existing home than to build one.

However, you may find that these numbers vary quite a bit in your own situation. There are several states where building a home is much cheaper than the median listed above, according to GoBankingRates.

Price to build a home

As discussed earlier, the median cost to build a new house is currently nearly $450,000.

However, remember that the cost to build a house will vary based on your location and the materials you choose. But this number is a good ballpark to consider.

Expenses to consider when building a home

Before you consider navigating the home-building process, take some time to estimate all of the expenses. Is it cheaper to build or buy a house? Considering your location and the cost of materials can help.

Here are the expenses you’ll need to keep in mind.

Although some seem obvious, others fall into the category of hidden costs that you might not anticipate. A budget calendar can be useful in helping you prepare for each cost at the right time.

Structural

The basics of the home don’t come cheaply. Some structural expenses include framing, building the walls and roof, and the foundation.

Of course, you don’t want to skimp on these items because they create the basic integrity of your home.

With building vs buying a home, you’ll have the ability to customize the layout of the structure, as well.

Interior finishes

Choosing your interior finishes can be a fun part of building a house. The flooring, drywall, etc., are part of the interior finishes.

Building your own home allows you to pick out everything to meet your specific tastes.

Instead of compromising with what’s available, you’ll get to make the choices. But there will be extra costs that go along with this.

Mechanical

The mechanical aspects of a home are usually hidden if they are done right. You don’t want to have to think about your plumbing or electrical systems. But you’ll need to pay for proper installation throughout your home.

Kitchen

The kitchen is often a significant expense – perhaps even the most expensive room in the house. You can easily spend thousands on a kitchen installation.

Installing a kitchen will cost at least $5,000 and up to $125,000, according to HomeAdvisor, so you can see that expenses range quite a bit.

Bathroom

Bathrooms are another area of the house that can push the total cost of building a home higher than you anticipated.

On average, adding a bathroom costs $5,000-$35,000, according to Angi.com. Depending on how many bathrooms you have in your home, this can be a significant cost.

Engineer

An engineer might be involved with your house building to ensure your new home is structurally sound. But you’ll have to pay for their services. Remember that an inspection of your new home with a structural engineer can cost 1 to 5% of your construction expenses, explains Today’s Homeowner.

Land

Of course, you can’t build a home without buying a piece of land. Depending on your location, this could be a major cost to build a house.

You might consider how to buy land cheap, but there will still be a cost.

Permits

Permitting is a cumbersome part of building a home. But unfortunately, it cannot be avoided. Building permits cost varying amounts, ranging up to a couple of thousand dollars or higher, so be prepared.

Renting until the home is ready

As you build a home, you cannot live in it.

In fact, without the basic amenities installed, you likely won’t be able to move in for several months. With that, you’ll likely need to rent a place to live while the home is completed.

Paying rent while paying for a home to be built can be taxing for any budget. But if you live in a high-cost-of-living area, you’ll find this an especially burdensome expense.

Ensure your budget can handle this double payment without sacrificing financial wellness before moving forward with a home build.

DIY or hiring professionals

Although it’s essential to consider your expertise before attempting any work on a home, you may choose to DIY some aspects and hire professionals for others.

If you happen to be a professional builder, electrician, plumber, etc., you may save some money by doing some of the work for the house on your own.

However, if you don’t have the know-how, you will need to hire someone, which is an additional cost.

Consider what projects in your home you can do and what you need to hire someone for with the cost of building a home.

Price to buy a home

The median cost to buy a home, as previously discussed, is about $375,000.

However, this price can differ greatly depending on where you live. So it’s important to look at the prices of homes in the area you want to live in.

You will also need to consider additional factors besides buying the home.

For example, are you planning on doing any remodeling or additional landscaping? That’s an added expense.

Do you want to add on to the house? Consider it in your house-buying budget.

Expert tip: Compare the actual costs of buying vs. building a home

Although it is cheaper on many occasions to buy an existing home, you should never take averages as a fact for your own situation.

Instead, price the cost of building vs buying in your own location. Make a list of every expense, from a construction loan for building to home inspections and realtor fees. Then compare the two prices to see which option is better for you.

Advantages of building a home

Building a home customized for your family can be a great idea. First, let’s explore the advantages of building a home.

Fewer people are looking to buy land

When buying a lot, you may not have as much competition. Although, it depends on where you are buying, what state, what is nearby, etc. Many factors affect the value of land.

You make decisions about landscaping

With a new build, you’ll have the opportunity to choose what landscaping you do for the outside of the house, including trees, grass, gravel, etc. This can be a big benefit, especially if you want something specific, like a yard that saves water.

Lower maintenance costs

Due to the newness of the home, you likely won’t have as much maintenance to handle in the near future.

After all, you’ll have all new appliances, a new roof, etc., which can be cost-effective upfront. You’ll still need to repair things in your home over time, but you are likely to have several years before anything significant breaks or needs to be changed. You’ll have time to set up sinking funds for home repairs and add money.

Choose unique features for the home

You can pick out everything to suit your needs and wants. From the number of bedrooms to the kitchen countertops and the flooring, a custom home can be exactly how you want it.

You may also choose to use more or less expensive materials, which can affect the overall price of the building.

Disadvantages of building a home

Of course, there are drawbacks, too. Building a home can be exciting, but there are things to be aware of. A few include:

Cost

Typically, the building costs for a home are more expensive. Plus, hidden costs can put stress on the budget of the homeowner before they even move in.

Although you may not be able to know in advance about every single expense, it’s vital to know all the high costs of buying a home and know what to expect before deciding.

In addition, you may want to have extra money set aside for things that you didn’t plan for to avoid being in over your head with debt.

Paperwork

There are also many additional things to consider, such as getting a building permit, a construction loan, and other paperwork that can be daunting and stressful. It’s a lot to keep track of, and it can be a challenge.

Difficulties with management

Building a home has many moving parts and pieces. With that, you’ll likely run into some stressful situations along the way.

With a new construction home, you may deal with problems like an unreliable contractor, appliances or other materials not arriving on time, etc. Issues like this can cost time and money.

Advantages of buying a home

Buying a home has its ups and downs too. And answering, “Is it cheaper to build or buy a house?” isn’t the only thing to consider.

Although you won’t have as many decisions to make regarding the actual home construction, there are still other things to think about.

Let’s start with the advantages:

Faster move in

Once you close on a home, you can likely move in right away instead of waiting for builders to finish up. Everything is already built and set up in the house, so you won’t need to factor in extra months of waiting if something gets off track with the building process.

Although you must consult with the sellers about when you can move in, it may be faster than when you are building.

Affordability

If you’re considering the pros and cons of building vs buying a home, existing homes are generally more affordable. Of course, you will still have the upfront costs of a real estate agent and a down payment, but there are other expenses buyers can avoid, like labor costs for building.

Because of this, buying an existing home can be one of the best money moves.

Ability to make changes

Although you aren’t building from scratch, you can choose to update areas of the home that matter to you.

For example, you could splurge on a new kitchen without going through the entire home-building process.

So you’ll be able to move in and have somewhere to live, but you can still make the house suit your needs.

Established landscaping

You won’t have to spend anything if your existing home has a green yard. It can be nice to buy a place where the landscaping is already done, and you don’t need to pay landscapers to add grass and trees to the space or spend time doing it yourself.

Of course, all of this depends on the particular home that you buy. And you may choose to make changes to the yard after purchase.

Disadvantages of buying a home

Although it may sometimes be considered an easier process, buying an existing home isn’t without its setbacks. Here are the downsides to buying a home:

Less energy efficient

Older homes tend to have some energy inefficiencies, which can present problems. With a newer home, energy efficiency can be considered before building occurs and factored into the upfront costs.

More maintenance

You might have to fix more things when you move in.

But if you buy a newer home that is only a few years old and doesn’t have a lot of maintenance issues, you can possibly save on costs for a time, which can help.

It’s important to consider any home maintenance or new things you may need to buy before closing on a home.

Replacing and removing old features of the home

You may also need to consider features that need to be replaced, such as wallpaper or carpeting, or you may need to get rid of lead paint, etc. Anything extra you don’t add to the costs initially can present budget challenges later.

Cheapest and most expensive states to build a home

The cost of building a home is not the same in every state. In some places, the costs are much lower than in others.

According to Today’s Homeowner, some of the most expensive states to build include Hawaii and Massachusetts, both costing over $400,000, but the least costly include Mississippi and Arkansas, both costing less than $300,000.

So, as you can see, the location that you build in can be a huge part of determining whether building a home is affordable or not.

Is it cheaper to buy land and then build your house on it?

While it can be less costly to buy land and build your house on it in some cases, the opposite will often be true. It all depends on location and timing when it comes to whether it is cheaper to buy land and then build a house on it.

There are many variables to consider. For instance, was the land bought years ago when prices were different? That can change the cost to build a house. How much will it cost you to build the house at today’s prices? Is building cheaper than buying an existing home or more expensive? These are ll factors to consider that will affect price the price of building a home.

That said, the cost of land plus the build will likely be more costly than purchasing an existing home.

Is it a good investment to build a home?

It can be a good investment to build a home, depending on your reasons and if it makes financial senses and/or saves you money. For instance, you might have a unique living situation where building a home to your specification would work best for you.

If you plan to live in the home long term, it can be a good investment knowing you’ll be there long enough to pay down your mortgage and build up the equity in your home. You may also be able to sell it in several years for much more money.

However, buying an existing home can also be a good investment, depending on your situation. You could consider doing renovation work to customize the home to fit your specific needs.

That said, if you don’t have the funds to build without creating a lot of debt stress, then no, it isn’t a good investment at the time.

Articles related to building or buying a home

If you enjoyed finding out is it cheaper to build or buy a house, you’ll love these other articles!

• How To Buy Land Cheap: Everything You Need To Know
• Advice For First Time Home Buyers: How To Prepare
• Renting Vs Owning A Home: Is Renting A Waste?
• How To Save Up For A House Down Payment

Is it cheaper to build or buy a house: consider all your options first

Ultimately, you’ll have to decide what matters to you most with building vs buying a home. Although it can be cheaper to buy an existing house, many factors can affect price, in addition to thinking about your preferences.

Do you crave customization? Or are you looking for an affordable and simple housing solution? Either way, you’ll need to get your financial house in order to move forward.

Not sure where to start? Check out our free foundational courses to build a bright financial future.

The post Is It Cheaper To Build Or Buy A House? appeared first on Clever Girl Finance.

Homeownership is often one of our biggest goals in life — to ditch landlords and rental apartments and put down roots in our own homes. However, the housing market and financial concerns can quickly put a damper on the dream of homeownership. It’s no surprise a lot of us are asking, Should I buy a house now or wait?

Unfortunately, there’s no one answer to that question. Buying a house is a very personal decision. What makes sense for one person might not work for another.

Keep reading to better understand your financial situation so you can make an informed decision when choosing to buy a house — or wait.

Should I buy a house now? What to think about before buying

Buying a house is a big undertaking, both financially and emotionally. There’s a lot of research, paperwork, and money that goes into the process.

What you need to do to buy a house

Whether you’re an experienced homeowner or buying your first house, the process usually looks like this:

1. Organize your finances and check your credit score.
2. Determine how much house you can afford and what you want in your home.
3. Save for a down payment.
4. Research mortgage loan options and get a pre-approval.
5. Research neighborhoods, schools, transportation, and other factors for your ideal home.
6. Start shopping for homes in your desired area.
7. Make an offer on a home.
8. Get an appraisal and home inspection on the home.
9. Finalize your mortgage and secure homeowners insurance.
10. Close on your new home, including paying closing costs.

These 10 steps might look simple on paper, but the whole home-buying process could take months. That doesn’t mean you shouldn’t buy a house though.

Reasons to buy a house now

Still, a lot of people go through the process every day, and there are plenty of reasons to buy a house now, including:

• Securing a great rate on a mortgage.
• Saving a significant down payment.
• Planning to buy at the end of your lease.
• Rent increases are beginning to outpace homeownership costs.
• You’re planning to live in the home for many years.
• You want to start building generational wealth.

Before jumping into homeownership, ask yourself a few key questions to get a better idea of whether or not you’re ready to buy a house.

Have you done your research?

I mentioned it before, but it’s worth saying again: home buying involves a lot of research. Here are just a few of the things to think about as you start looking at homes and asking yourself, “Should I buy a house now or wait?”

• Do you have a specific city or neighborhood where you want to live?
• Have you considered the local amenities, like parks, schools, restaurants, and grocery stores?
• What is crime like in the area? Would you feel safe living there full-time?
• What’s the commute like?
• Are you planning to live in the home long-term?
• Will you rent it out if you move?

Doing your due diligence now — well before you get into the buying process — can potentially save you a lot of headaches in the future.

For example, you stumble upon what you think is your dream home, but you don’t know a lot about the neighborhood. You decide to jump in with an offer anyway, only to find out after buying the house that it takes over an hour to get to work due to traffic.

In this case, a little research on travel times and distance to your office would have saved a lot of time and money.

The local market

The research continues once you know where you want to live. Now, it’s time to look at the housing market in the area. You’ll want to know if it’s currently a buyers’ market or a sellers’ market, as this can affect housing prices.

In addition, you should consider the current pricing trends in your area and local and state tax rates. Prices that are much higher or lower than usual could indicate a shift in the desirability of the area.

Taxes will also play a role in the price of homes in the area. Even if you buy a home below market value, high tax rates could leave you house poor with a monthly payment you can’t afford.

Unexpected costs of home shopping

Though it’s likely to be the biggest expense, the purchase price of your new home is far from the only cost of buying a house. Many first-time buyers are surprised to learn of the unexpected costs, so be sure you know how to save up for a house first.

First, there are several immediate fees and expenses you’ll have to cover, usually on closing day. This includes closing costs and fees related to your mortgage loan. Closing costs tend to be around 3-6% of your loan amount — which can add up quickly.

For example, you may have to pay a loan origination fee to the mortgage company simply to get your loan. This fee helps cover the administrative costs of underwriting and processing your loan.

Likewise, you’ll likely have a title search fee, which could cost a few hundred dollars. This fee pays for the title company or an attorney to search for any liens or legal problems with the home you want to buy.

Other costs may not be immediate expenses, but you’ll still have to pay them. Homeowners’ insurance and property taxes, for example, could be a large expense to buying a home, depending on where you live. Usually, these costs are rolled into your monthly mortgage payment.

Do you plan to be at the location for several years?

You may consider waiting to buy if you’re planning on moving again in a year or two due to the time and costs of purchasing a house.

On the other hand, if you plan to be at the location for several years (such as 5 years or more) you’re likely to make up mortgage interest and also closing costs. Then homeownership could make sense for you.

How’s your credit score?

Your credit score acts as a snapshot of your financial responsibility to lenders, and the higher your score, the better. You’ll increase your approval odds when applying for mortgages. Checking your credit score is essential when buying a home.

A higher credit score also often means you’ll get access to better mortgage rates. While a single percentage point might not seem like much now, paying an extra 1% in interest will add up throughout a 30-year mortgage.

Getting your credit score in shape can be a big help to lower the overall cost of buying a home.

If you don’t know your score, you can start by getting your free annual credit report. Your credit report shows your snapshot score, as well as more details about your borrowing and payment habits.

Even if you’re planning to wait to buy a house, monitoring your credit score regularly is a good idea. This can help you spot — and fix — fraud or mistakes on your credit report.

Have you saved for a down payment?

Most home buyers don’t purchase the full cost of their home immediately. You usually need a down payment, which is a lump sum of money you’ll put toward the initial purchase of the home.

The bigger your down payment, the less money you have to borrow using a mortgage. This means you’ll start your homeownership with more equity in your home.

The “standard” down payment is 20%, but not everyone is able or wants to put down a full 20% of the purchase price of a home.

For example, if you’re buying a $400,000 home, a 20% down payment is $80,000. This might be an unreasonable figure for your buying timeline.

The good news for homebuyers with smaller down payments is that there are government-backed loan programs that can help you get a home. Common loan programs include:

• FHA loans
• The U.S. Department of Veteran’s Affairs loans (VA Loans)
• USDA Rural Development loans

Making a smaller down payment could help you get into homeownership sooner rather than later. However, putting less money down on a home purchase has its drawbacks, such as:

• You’ll have less equity in the home to start.
• Low down payment loan programs often have strict borrowing rules and income limits.
• You may not qualify for the best mortgage rates or loan products.

If possible, it’s generally recommended to learn how to save up for a house down payment as much as possible before buying.

Can you afford a mortgage with your current expenses?

A key step in the mortgage process is getting a mortgage pre-approval. This is a letter from a lender stating they’ve approved you for a mortgage at a particular interest rate and loan amount.

Before you apply for the full amount of your preapproval, consider the monthly cost of your mortgage payments. This includes homeowners insurance premiums and property taxes.

However, the preapproval amount isn’t the same thing as how much house you can afford. Many preapprovals give buyers a bigger loan than they would realistically be able to handle each month.

You also need to consider your existing expenses. While you’ll probably drop your monthly rent when you move into a home you buy, you’ll still have most — if not all — of your other expenses.

For example, if you have a lot of student loan debt, a high car insurance rate, or an auto loan. These recurring expenses will cut down on the monthly cash flow you have available for a mortgage payment.

Can you afford repairs or renovations?

Finally, a home doesn’t stop costing you money when you buy it.

In fact, a lot of homeowners start finding problems only after they’ve moved into the home. Even small repairs can add up to a lot of cash over time, which may have you questioning, “Should I buy a house now?”

This is why it’s important to have a healthy emergency fund and budget for savings, even after buying your home. If you can keep your monthly expenses low enough to fund your savings, you’ll find it easier to tackle unexpected expenses.

For instance, shortly after my husband and I bought our current home, the gas fireplace stopped working. The repairs cost over $2,500 and were unexpected. Luckily, we had the savings and cash flow to cover the cost without affecting our other financial obligations.

Reasons you might wait to buy

Buying a house is exciting. And it’s often seen as the top financial goal you can reach. But not everyone’s ready to buy a house.

For many people, it makes sense to wait to buy a home. Check out some of the reasons you might want to wait before buying.

Not much real estate inventory

As mentioned before, being in a seller’s market can cause housing prices to go up. If the area where you want to buy your home doesn’t have a lot of homes for sale, you’ll probably pay more than you like.

Additionally, you might feel like you have to settle for a home you didn’t really want because that’s what was available.

Or, you can wait until the market tips back toward a neutral or buyer’s market. This means there’s more inventory on the market.

In turn, you’ll see lower prices and have more options when picking your dream home.

Home prices are likely to go down

It might not make sense to buy a home if you know prices are likely to drop within the next few years. In 2022, for example, home prices hit a record high. In turn, home sales dropped.

With higher prices (and increased interest rates), fewer people decided to buy. And that’s often a pretty good strategy.

In your research, you’ll probably look at historic home prices in your area.

Although prices may steadily rise over time, a sudden spike could be a sign to wait out inflated prices. If you can keep renting for a couple of years, you give yourself more time to save for a down payment, and you’ll likely get lower home prices.

Saving for homeownership

A home purchase is one of — if not the — biggest single purchase you’ll ever make. Most of us aren’t regularly spending hundreds of thousands of dollars at one time. And while you’ll probably pay the cost off over many years with a mortgage, it’s still a giant financial obligation.

Sometimes, the best thing you can do for your financial situation is to simply wait to make that big purchase. Many people choose to delay homeownership to give themselves more time to save up for a down payment.

In addition to a bigger down payment, waiting to buy can usually help you save up extra for unexpected costs like closing costs, necessary repairs, and things like new furniture.

Working on your credit score

Remember, a higher credit score usually gives you a better chance of mortgage approval and access to lower interest rates versus someone with a lower credit score.

You might want to put off buying a home so you have time to clean up your credit report and increase your credit score.

Let’s say you have a lot of debt and have missed a few payments. A mortgage lender might be wary of approving a loan and a reasonable interest rate due to past payment history.

Instead, you take a few years and focus on the best way to get out of debt and start making on-time payments each month. As a result, your credit score starts going up. When a lender sees your history of on-time payments, they’ll feel more confident lending money to you.

Expert tip

A house is a long-term financial agreement, so it’s best to ask yourself a lot of questions first, do research, and take your time.

If you feel rushed to buy a house, it’s likely not a good time to buy, regardless of what the housing market is doing.

Consider your personal situation when buying a house

Should I buy a house now or wait?

Ultimately, that’s the question you have to ask yourself. And the only way to answer it is to look inward. There’s no magic answer on when’s the best time to buy a house because everyone’s financial and housing situations are so different.

Of course, that doesn’t mean you should rush off to buy or put off buying because it seems complicated. Instead, take the time to think about your situation:

• Why do you want to buy a home?
• Are you happy with your current housing situation?
• Are you anticipating changes to your housing?
• Can you realistically afford a mortgage, homeowners insurance, taxes, and unexpected repairs?
• Will you be approved for a mortgage?
• Could you improve your credit score or down payment before applying?
• Are home prices in your area reasonable?

Going over these questions can help you decide if buying a home now or waiting a while is the right choice for you specifically. You can also learn a lot about your personal home-buying preferences by asking others about theirs.

For example, ask your friends, family, and neighbors why they did or didn’t buy a home.

Why I bought a house at the peak of high prices

To give you a better idea of how personal home buying can be, let me share my story. My husband and I bought our current home right around the peak of the home price spike — late spring 2022.

On paper, it probably made a lot more sense to wait to buy a home once prices came down.

Additionally, the housing inventory was low, so we didn’t have a lot of options.

Still, buying made the most sense for our situation:

• We were moving halfway across the country from Idaho to Iowa unexpectedly for my husband’s job — both in rural areas with low inventory.
• Our Idaho home’s value had doubled, and we had significant equity in it.
• We have two cats and one high-energy dog.
• We also have several utility trailers and a UTV, and need space to park three large vehicles.
• We qualified for great rates on a mortgage.

Home inventory was low, but finding a rental property that could fit all of our stuff (plus our pets) was essentially impossible. We would have had to rent a house to fit the outdoor equipment and vehicles. In addition, it would have to allow pets and have space for our dog to run around.

With what was available for rent and how much we had for a down payment, the cost of renting would’ve ended up being more than a mortgage. So we started on our moving out of state checklist and began looking for a home.

We also happened to find a house that fit our style, space needs, and budget.

Although we purchased the home at a likely inflated price, our large down payment and great mortgage rate mean it made the most sense for our current financial situation.

Should I wait to buy a house in a recession?

There’s been a lot of talk in recent years about an impending recession and how to prepare for a recession. Whether we’re about to enter one or not, you’re probably wondering how a recession can affect home buying.

For many people, buying a house during a recession is a risky move. Job stability might be shaky, leading to uncertainty about your monthly income. Would you be able to cover your mortgage if you lose your job?

Likewise, your down payment and emergency savings may not be as strong as they are outside of a recession.

For example, you have your down payment in an investment account to help it grow. If we entered a recession, the market is likely to go down. Suddenly, your down payment isn’t worth as much as it was before.

On the other hand, someone who is financially stable might find a recession to be a great homebuying opportunity. Home prices tend to drop during recessions. If you have a lot of savings and recession-proof jobs are available, a recession could be a great time to get a good value on your dream home.

If I can afford the house payment, should I buy a house now?

Not necessarily. Just because you make enough money to afford a house payment each month doesn’t mean that you’re ready to make such a large purchase. Also, consider if you have money for a down payment and savings for repairs and expenses.

Should I wait until the market crashes to buy a house?

The truth of the matter is that no one can predict exactly when the next housing market crash will be. Plus, there are always deals to be found in the housing market if you are patient and flexible with your search. Waiting for a housing crash should not be the sole decision you base your home purchase on.

For instance, you’d need to ensure you are financially prepared, you’ve identified a location to move to based on research and it all works for the timing of your life.

Related posts to buying a house now

Enjoyed this article? Check out these articles related to buying a house!

• How To Go About Buying A House To Rent Out
• The Importance Of Black Homeownership
• Advice For First-Time Home Buyers: How To Prepare
• House Hopping And How It Impacts Your Finances!

The right time to buy a house is when you’re financially ready

Answering the question, “Should I wait to buy a house?” is a difficult thing to do. The only person who can tell you if it’s the right time to buy a house is yourself. Avoid rushing into the decision one way or the other to clearly determine if the house is an asset or a liability.

You don’t want to accidentally wind up with a house you can’t afford. You also don’t want to miss a good opportunity because you decided to wait without thinking it over.

Before you make your decision, carefully consider your financial situation and financial goals, including your savings, credit score, and career aspirations.

You should also think about your long-term house goals and research what’s going on in your local market. This will help you make the right choice for you and your family.

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