Your Money Matters: 3 Key Questions To Ask Before Buying a Home

For most people, buying a home is one of the biggest financial decisions of their lives. Before making that commitment, it’s essential to ask yourself – and your significant other – a few important questions.

Here are three key considerations, adapted from MoneyWatch's "3 Questions" series, to help you decide if now is the right time to buy a home.

1. Am I prepared to buy?

The first question is about your financial readiness. How much do you have saved for a down payment? If it’s less than 20%, you’ll need to pay mortgage insurance, which can add to your monthly costs. Additionally, don’t forget to factor in property taxes. These can vary drastically depending on the city or county, sometimes amounting to thousands of dollars in difference each year.

2. How much can I save by waiting?

If you can get a mortgage today with an interest rate of 5%, is it worth waiting to see if rates drop to 4% next year? Using a mortgage calculator online can help you determine potential savings by waiting versus buying now.

3. Will interest rates rise again?

Interest rates can fluctuate, and this could impact your mortgage decision. You might consider an adjustable-rate mortgage (ARM) if you believe rates will go down in the future. However, locking in today’s rate with a fixed-rate mortgage could provide more stability over the life of the loan.

Lastly, it’s worth noting that, according to the Federal Reserve, homeowners have a net worth about 40 times greater than those who rent. So if you’re on the fence about renting versus buying, keep this in mind.