Opinion: Unsure if the Time Is Right to Purchase a Home? Here Are the Key Considerations

Knowing when and how to buy a home in the current market can feel like the first of many homebuying challenges. This is especially so with recent reports that renting is cheaper than buying a home in the 50 largest metro markets. These economics counterbalance the traditional, long-held belief that homeownership is an important source of wealth-building.

As a result, prospective homebuyers are feeling increasingly uncertain in today’s homebuying landscape. According to a new Bank of America Homebuyer Insights Report, 57% of prospective buyers and current homeowners are unsure whether it’s a good time to buy, compared to 48% at this time last year. And among first-time homebuyers, 62% shared they’re unsure if owning is better than renting right now.

In San Diego, there are several factors that contribute to this sense of uncertainty. Zillow reported that San Diego was now the nation’s third highest-priced rental market, yet Realtor.com recently predicted that San Diego would have one of the nation’s hottest real estate markets, despite higher mortgage rates.

While many may be waiting for the Federal Reserve to cut interest rates from levels not seen in decades, once rates drop, the San Diego homebuying competition will likely become even more fierce.

The bottom line is that buying a home is often one of the largest investments one will make in their lifetime and is an inherently personal decision. While 60% of prospective buyers say that buying a home is the best long-term decision for them, they must also weigh their financial situation, current interest rates, and availability of homes where they’d like to buy.

While renting might be the best choice for many families right now, if you are interested in buying a home within the next few years, there are key steps you can take now to prepare you and your finances to be in a stronger position.

Familiarize yourself with the process: Even with steady income and good credit, the Bank of America survey found that prospective buyers often don’t feel confident that they know enough to take the next step in purchasing a home. Working with a mortgage broker can help you understand your options, what special programs you may quality for, and what you can afford. Getting a preapproval can be extremely valuable when it comes to making an offer on a house, especially in a competitive market like San Diego.

Prioritize your credit score: A higher credit score can make it easier for you to get a loan or borrow at more favorable rates. To build your credit, work to pay bills on time, keep credit card balances low, and avoid taking on new credit unless absolutely necessary.

Save, save, save: Having cash at the ready to buy a home can help you tackle down payments, maintenance costs, and any unexpected expenses that may come when buying a home. Build your savings by creating a spending plan and sticking to it. To help bridge some of the mortgage cash gaps, Bank of America’s Community Homeownership Commitment offers up to $17,500 in free down payment and closing cost grants.

Minimize debt: There are a few key approaches you can take to reduce your debt. Target one debt at a time (highest interest debt first), always make at least the minimum payment on your credit cards and loans, and consolidate debts when you can.

While buying a home can be daunting, especially in San Diego’s current sellers’ market where buyers are competing amid multiple offers, the most important thing you can do is to start early and familiarize yourself with the process. Taking stock of where you are financially, understanding the budget you may be approved for, and getting a sense of what that budget can buy will prepare you to take that next step when the time is right for you.

Johnathon Gile-Morgan is vice president of preferred lending for Bank of America in San Diego