Timing is Everything: How to Make Smart Decisions About Buying, Selling, or Refinancing Your Home

The housing market is constantly changing, which means there are external factors to weigh when it comes to whether to sell, buy, or refinance your home. Fortunately, these external factors aren’t the only things you should consider.

Your situation is what matters the most. From your financials to your goals, you should consider all aspects of your life before you make decisions about your home.

How to Know It’s Time to Buy a Home

Whether it’s your first home or you’re preparing to buy something new, there are many factors you’ll need to consider. It may be time to buy a home if:

You Have Job Security

When you take out a loan to buy a home, you’re committing to paying a consistent monthly amount that could last for decades. You don’t need to keep the same job throughout the entire life of your loan, but you must be able to afford the payment each month.

You’re Ready to Put Down Roots

To maximize the financial benefits of owning a home, you should plan to live there for at least three years. Do you like the community, climate, and activities available in the area?  

You’re Financially Prepared

Your financial situation will be a big factor in whether or not you’re ready to buy a home.

  • Savings: Do you have enough money to pay for your down payment, closing costs, property taxes, and maintenance of your new home? Research and understand the money you’ll need and have a comfortable cash reserve beyond that.
  • Credit: The best rates are reserved for people with high credit scores. There are options for people who have credit challenges, but your best financial move is to work on increasing your score before buying a home.
  • Debt: Do you know what your Debt-to-Income (DTI) percentage is? Before taking on any new debt, it’s important to understand this ratio. This number compares your monthly debt payments to your monthly income. Experts typically recommend limiting your DTI to 30%.

How to Know It’s Time to Sell Your Home

Leaving a home you’ve spent years in can be hard, but it can be exciting to find something new. It may be time to sell your home if:

You’ve Outgrown Your Home

When you’re growing, the starter home you purchased can seem smaller and smaller. More kids, a new pet, or space to host events are all great reasons to look for something bigger. When your home starts to feel cramped, it could be a sign that you want to sell and find something new.

Your Home Has Outgrown You

In contrast, your home might feel too big. As the kids move out, and you have fewer things, a home that might have been perfect could feel like a lot to keep up with. Downsizing is a great way to find a home for your current situation.

It’s a Seller’s Market

Your home is an investment, so it’s best to sell when its value is highest. But what are the signs that it’s a seller’s market?

  • Quick Sales: If you see for sale signs pop up and disappear within a few days, it could be a sign that you’re in a seller’s market. Fast turnaround means people are buying homes up, and fast.
  • Local Economy Growth: You can expect a seller’s market if your community is booming. New job opportunities mean new people and new people need local housing. Keep an eye out for new business expansions or relocations to your area.
  • Word of Mouth: The best way to understand a market is to talk to people experiencing it. Do you have a friend that recently sold a home? Ask them about the process. If they had multiple bids, quick negotiations, and offers above the asking price, it’s probably a seller’s market.

How to Know It’s Time to Refinance Your Home

Your mortgage is one of the biggest investments you’ll make in your life. With a large asset, even incremental rate changes can have a big impact. It may be time to consider refinancing if:

Rates Are Down

The first and most obvious sign to consider refinancing is a low-rate environment. If rates are down significantly across the board, check in with your bank to see if you can get a better rate.

Your Financial Situation Has Improved

If your credit score has improved significantly or you’ve decreased your DTI, you could qualify for a better rate. Check your historic financial situation against the one you have today. If the numbers are better, check in with your banker to see if refinancing is right for you.

Additional Refinancing Considerations

  • The Length of Your Loan: Refinancing includes significant upfront costs, so it’s important to know how long you’ll be paying your new loan.
  • How Long You’ll Be in the Home: If you plan on moving or selling your home in the next few years, it’s probably not a good financial decision to refinance your loan.
  • How Close You Are to Paying Off Your Loan: If you only have a few years left on your loan, you probably don’t want to refinance. The incremental rate changes and upfront costs may only be worth it over a long period.

If you’re wondering what to do next, contact our team of mortgage experts. They would be happy to discuss your situation and offer advice on your best options.

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