Should You Buy a House in 2023? Here’s How to Decide

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Don’t move forward with a home purchase without thinking about these issues. 

Buying a house is a huge financial and personal decision that’s going to shape what the rest of your life looks like for years to come. You don’t want to jump into it without thinking through the details.

If you’re contemplating getting a mortgage and purchasing a property in the new year, here are four key questions to ask yourself to decide if that is really the right choice for you.

Are you financially ready to buy?

Before even considering any other issues, you need to make sure you are in a good financial position to move forward with a home purchase. This means you need to take care of the following tasks:

Check your credit report and score and make sure you have a reasonably good credit score (ideally, your score will be above 700 to get the best rates, but if it is below 640 then you should think seriously about waiting to improve your credit before buying).Confirm you have some money to put down. Ideally, you’d make a 20% down payment, but if that’s not possible, you’ll typically want to have at least 5% down.Make sure mortgage payments will be affordable for you. You should try to keep total housing costs to no more than 25% of your income in order to avoid being house poor.

You’ll want to be sure you’re in a good financial position to both qualify for a mortgage and be able to pay for your home loan once you get it.

What will your mortgage rate be?

Mortgage rates are higher now than they have been in years. Some experts project that rates will slightly fall next year because demand for home loans will decline and banks will have to drop their rates to get borrowers. Others predict rates will increase because of continued efforts to fight inflation.

Although it can be hard to predict where rates will go in 2023, you’ll want to think about whether you’re comfortable borrowing at the level they are at when it comes time to get your loan.

What does the real estate market look like in your area?

Property values skyrocketed when mortgage rates were low and the supply of homes was low during the heart of the COVID-19 pandemic. But property values have begun to fall as demand for houses drops due to today’s higher rates. Many experts believe they are likely to continue to fall further, although not everyone agrees.

If prices remain high in your area, think about whether there are economic indicators — like properties staying longer on the market before selling — that could suggest prices could decline further.

How soon will you need to move?

Finally, think about whether you will need to relocate shortly after buying.

If you have to move soon, it can be harder to make back your money due to the high transaction costs associated with buying and selling a home. A temporary decline in property values, if it occurs, could also affect you more if you don’t allow a lot of time for your home to appreciate in value. Unless you’ll be in your home for around five years or longer, you may want to wait to buy.

By answering these key questions, you can make an informed choice about whether buying a house in 2023 makes sense for you. Since this is a big decision, take the time to think your answers through.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More