By Mark Sprague, Independence Title’s Director of Information Capital
Before you line up the moving truck, make sure you have all the pieces in place. Here’s how to tell if you’re ready to buy a house.
1. You have good credit. Like it or not, credit scores are a major factor in finding shelter, whether it’s apartment approval, mortgage approvals, or setting interest rates. The higher your score, the lower your mortgage can be. Typically, consumers with credit scores under 700 will pay higher mortgages than those with high credit scores.
2. You plan to stay in one place for longer than 5 years. In today’s market, with minimal appreciation, the last thing you want is to bring money to the closing table to sell the house. If you are the seller, sellers typically pay 6% to 10% of the home’s final sale price in total closing costs and commissions, which are deducted directly from your final sale proceeds.
3. You’re prepared to ‘drive till you qualify’. Most of us grow up believing we could live anywhere we want. But whether you rent or buy, finances and lending options will impose limitations.
4. Your debt is under control. Contrary to popular myth, you don’t have to be debt-free to purchase a home. But that doesn’t mean it’s wise to pile a mortgage on top of mountains of debt. The general rule of thumb is to limit your total housing payments to no more than 28% of your gross income and your total debt (including the mortgage) to no more than 36%.
5. You have enough saved for a down payment. A down payment of at least 20% can lead to lower mortgage payments (no PMI insurance). For a home valued at $400,000, that means $80,000 cash on hand. In certain circumstances, you can put down less than 20%. For example, loans from Freddie Mac and FHA may require a down payment as low as 3% of the home’s purchase price if you meet certain requirements. But paying less than 20% typically means adding 0.03% to 0.07% of your loan amount per year in private mortgage insurance (PMI). The PMI payment usually remains until you reach that 20% paid threshold.
6. You have enough money to pay your closing costs. When you first buy a home, you’ll have other expenses on top of your down payment. You can generally expect to also pay for:
a. Loan origination fees
b. Home inspection
c. Appraisal
d. Title insurance (negotiable item)
e. Recording fees
f. Prepaid property taxes and mortgage insurance
g. Closing costs can add 2% to 5% of the home’s purchase price to your total cost. Lenders typically let you roll this amount into your loan, which means you pay interest on it in addition to your mortgage. If you can, consider paying for closing costs out of pocket.
h. Moving costs and a buffer for unexpected costs
7. You can afford the monthly costs of homeownership. To understand your total housing payments, look beyond the monthly mortgage amount your lender will bill you. While your monthly mortgage payment includes repayment of principal and interest, your housing costs may also include:
a. Property taxes
b. Homeowners insurance (Some loans require you to pay property taxes and homeowners insurance from an escrow account.)
c. Homeowners Association (HOA) fees, if applicable
d. Utilities
e. Repairs
8. Your income is stable. Having enough money set aside for a down payment and closing costs is one thing. Making enough to cover your monthly housing expenses for the foreseeable future comfortably is quite another. Owning a home is a financial commitment that often lasts for decades. Consider the following before you move forward:
a. How good is your employment track record?
b. How’s your job stability? Lenders are happier with clients who have been working at one location for 2 years or more.
c. Is my future income in jeopardy because of an unstable job situation?
Now is the time to buy!
If you’ve been waiting for the housing market to get more affordable / values to slow / rates to drop before buying a home, 2027 may not bring much relief.
The latest forecasts suggest 30-year fixed mortgage rates could remain closer to 7% to 7.5% next year, keeping borrowing costs high for prospective buyers. The average 30-year fixed rate is currently 7.28% as of 10/1/2026. It was 6.34% a year ago.
In other words, economic forecasters who expected mortgage rates to ease at the start of 2026 now expect them to stay roughly where they are today or higher, due to inflation indicators and historic inflation pressures (tariffs/trade wars, Middle East war, etc.) under the current administration. (Rates had dropped to 5.99% at the start of 2026).
Still thinking about “waiting out” the housing market and lending market? Here’s what current data suggests: every year you delay, affordability declines, inventory selection diminishes, and your long-term costs climb. Prices aren’t crashing, insurance isn’t slowing, and construction costs are still outpacing income growth.
Nobody can predict the future. The last 20+ years have proven that! But waiting will cost you.
You should have bought 5 years ago. It will be the same 5 years from now. Now is a good time due to wider inventory selection, sellers being more willing to negotiate, builders offering incentives including rate buydowns, etc. The house you look to buy this year will be more expensive next year. Rates have shown little chance of lowering significantly. Now is the time to buy.
If you have any questions/concerns, don’t hesitate to contact your Independence Title representative.
