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After its September meeting, the Federal Reserve said it would not raise the federal funds rate — this time, anyway. After raising the federal funds rate for multiple consecutive meetings, those increases were passed along to mortgage interest rates.
Before inflation and high interest rates, mortgage rates were around 3%; now they can be as high as nearly 7%.
The higher interest rates have made many potential homeowners put their desired purchase on hold, but there are many still looking to buy a home. The fact that the Fed paused interest rate hikes, for now, can bring stability to the housing market and some affordability to potential homebuyers.
But interest rates aren't everything. If you think now might be the time to move forward with a home purchase, here are three signs that you may be ready to buy a home:
1. You have a sizable down payment
It can take a while to save money for a down payment, but if you can make a larger down payment it will serve you better. Making a larger down payment makes you a less risky borrower to mortgage lenders and can put you in a position to negotiate a better interest rate.
A larger down payment also reduces your outstanding loan balance, which can create a larger pocket of home equity and allow you to refinance or sell your home down the road. Plus, a larger payment upfront can also reduce the total amount of interest you pay over the life of the loan.
2. You have emergency savings
You hear so many people say that they were wiped out after purchasing their home, and that should not be the case.
After buying a home, your expenses will automatically increase and the transition to being a homeowner can be easier if you have savings to fall back on. If you can avoid it, you don't want to purchase a home without having any savings in the bank.
If you are still building an emergency fund, try to have six to nine months of savings in your high-yield savings account.
Build an Emergency Fund SoFi Checking and Savings is one of the best checking account options if you want to keep your savings and checking with one bank. SoFi offers Money Vaults, a tool that can help you save for specific expenses and track progress against your savings goals.
3. You can afford the surprise costs of homeownership
When you're considering buying a home, typically the only things you will hear about are the interest rate and the mortgage payment. Sometimes only the mortgage payment, but there is so much more to owning a home than the mortgage payment.
I owned a home for seven years and I cannot tell you how much money I spent on maintenance and upkeep. As a matter of fact, shortly after moving into my home, I had to replace the washer and the dryer. I hadn't been in the home six months before I had a $1,500 expense!
That's the thing about homeownership: It's all on you. Lawn care, higher utility costs, appliance maintenance — all of it. I have a colleague that bought a home with a pool and he said, "I could not have imagined how much pool maintenance costs!" Many homeowners move into their newly purchased homes and are flabbergasted at the expense that comes with homeownership in addition to the mortgage.
Do the research and see what owning that home will cost you in total. Look at average homeowners insurance costs, call up a lawn care company and ask what they charge for the size of lawn that you have, and ask the utility company what the average heating and cooling costs are. Before you buy your home, do a little homework so you are not caught off guard when those bills are due.
See Today's Mortgage Rates Check today's average mortgage rates and learn more about the amount of house you may be able to afford.