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Saving up to buy a home is no easy feat.

One of the key components of being able to successfully buy a home is having enough cash for a down payment plus closing costs. Generally, you’ll need at least $20,000 to buy a home. The old 20% down rule does mean a low payment, but may or may not make sense for your specific financial situation.  As you continue to save, your ability to buy a home could be compromised if you are in an area such as Sonoma County, California, or other pockets of the country where prices continue to rise.

Can you get in now? Does it make sense? If you have enough money to also meet your other financial obligations, buying a home with a long-term, fixed-rate mortgage is generally a safe bet.

On the other side, if you’re in a competitive market, buying a home now may mean taking on a payment slightly higher than might be financially optimal. It may mean a higher payment until you can pay off some debt, you come into some cash, a life event happens or your income is set to rise. If you know one of these things will happen, taking on those higher mortgage payments could make sense. If not, it may be best to wait.

Here are some other factors to consider when deciding when to buy.

1. Rising Interest Rates

If rates go up, even a little, your payments likely will as well. Every .375 rate increase generally means you pay $75 more per month on every $100,000 borrowed. In other words, the more home you are trying to buy, the more exposure you have to payment volatility based on changing rates. This, of course, ties directly into how much payment you’re looking to handle on a monthly basis.

2. Rising Home Prices or a Higher-Priced Home

Homes typically move at a faster pace in terms of volume, activity and appreciation than your ability to save. If you are saving 8% of your gross income, but homes are appreciating at 10%, for example, you are going backwards. It means your down payment will be worth less as the home may inevitably cost more in the future, depending on your market. If you were to buy a home today for $550,000 or wait a year and that $550K home is a now a $600K, you would’ve missed an opportunity.

If you are looking to buy a home, and you can afford the mortgage payment, generally speaking it might make sense to do so knowing that you would be on a fixed-rate,amortizing principal-and-interest mortgage – nothing exotic – while continuing to build equity in your home. This way you have two factors at work in your favor: the equity built up by virtue of making your payment each month, and your home’s increase in value.

Case in point: if you buy that house at $550,000 today and that house becomes $600,000 in 12 months, you can refinance for payment reduction, making the home more affordable.

3. Your Credit Score

While you don’t need a perfect credit score to get a mortgage, people with scores below a 620 can have a tougher time securing financing. If your score is subpar, it’s a good idea to try and clean up your credit before you look to buy a home. You can pull your credit reports for free each year from AnnualCreditReport.com, then hunt for and dispute errors and discrepancies.

Working hard to improve your score may also help you nab a better interest rate, so the state of your credit score is worth considering before you buy a home. You can monitor your progress by viewing two of your credit scores for free each month on Credit.com.

[Offer: Denied from a loan? It may be because of a low credit score due to errors on your report. Lexington Law can help you navigate the credit repair process so you can get back on track. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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