You've been saving up for a while now, and this is supposed to be the year you stop renting and finally become a homeowner. It's a big step, but all your efforts have led to the big moment when you make an offer on a home.
But what if you waited? At least a little longer.
You may feel prepared to purchase real estate now, but there are a number of factors -- some in your control and others very much out of it -- that can contribute to whether you're able to buy the home you want, or if you'll find yourself house hunting without finding that property that calls out to you.
According to real estate information company realtor.com's 2018 State of the Housing Union report, both home prices and sales continue to be held back due to a lack of homes on the market, making it particularly difficult for millennials who are first-time homebuyers to break into homeownership.
In a press release for the relator.com report, Joe Kirchner, senior economist for realtor.com, noted that an increase in new construction hasn't eased inventory shortages yet.
"Builders will need to focus more on homes geared for moderate incomes, partner with the government on initiatives to transform distressed urban neighborhoods and overcome labor shortages through a combination of workforce development training and pressure to ease artificial restrictions on the supply of labor," Kirchner said in the release.
Whether it's a tight housing market where you currently live or you're simply not in the right place financially to buy yet, you may benefit from holding off for a few months, or even a year, before jumping into homeownership.
Here are five reasons to wait on buying your first home.
You can't decide where to live or what you want out of a home. Most people planning to purchase a home have given some thought to an architectural style they like, the number of bedrooms they'll need and what neighborhood it would ideally be located in. If you can't answer any of these questions, take it as a sign you're probably not ready.
It's particularly important to have answers to such questions because they'll be some of the first ones asked by a real estate agent. Zoe Kellerhals-Madussi, a licensed real estate salesperson for full-service brokerage firm Triplemint in New York City, says she can typically tell if a buyer isn't likely to get to a deal from the first few interactions.
"If you can't get answers to those simple questions, that's already a big red flag right there," Kellerhals-Madussi says.
Your budget isn't where you want it to be. It takes a lot of discipline to be able to save enough for a down payment, and you may find that you're still not quite there for your desired price point.
You don't need a 20 percent down payment to purchase a home these days, as mortgage programs for 3 percent, 5 percent and 15 percent down are gaining popularity to help homebuyers -- first-time buyers in particular. For current and former members of the military, Veterans Affairs loans even allow you to put nothing down on your mortgage.
Of course, the more you put down on your home the less you'll need to pay on a monthly basis. Michael Zimmerman, senior vice president of investor relations for private mortgage insurance company MGIC, says the smaller the down payment, the riskier the loan is for a lender. "The odds of that borrower defaulting has increased," he explains.
With lower down payments, you'll pay more with the addition of mortgage insurance, which varies based on the program and your financial history. If the current state of your savings means you'll struggle with higher monthly mortgage payments, you'll have to settle for a less expensive house that you may be unhappy in or you won't have the money to pay for repairs if the furnace or fridge break. So some extra time for saving can be worth the wait.
[Read: 12 Things That Trip Up Homebuyers.]
You don't know your timeline. A bit of information you should have nailed down before you start touring properties is your timeline to move. You may be moving from a different city and you're on a strict deadline to find a place, or you need to wait to move until after the kids are out of school for the summer so they don't change schools midyear.
For most first-time homebuyers, knowing your timeline also means knowing the parameters of your lease.
Kellerhals-Madussi recalls a client who was unsure when her lease was up and was either forgetful or trying to avoid answering the question. "I asked her I think probably 10 times when her lease was up, and she just kept on avoiding me," Kellerhals-Madussi says. "Every time she said, 'I'm going to check today, and I'll get back to you,' and she never did check."
From the interaction, Kellerhals-Madussi was able to tell a purchase likely wouldn't happen, but she allowed the client to realize in her own time. Sure enough, "she came back to me a couple months later and said, 'Actually we just realized we're not ready to purchase now,'" Kellerhals-Madussi says.
Your credit is bad or could be better. You don't need perfect credit to get into the homebuying game, but if you've got room for improvement, you may see the benefit of raising your credit score before seeking a mortgage lender. Mortgage lender information company The Lenders Network reports borrowers typically need a minimum FICO score of 580 for an FHA loan, while a conventional loan typically requires a minimum of 620.
Mortgage lenders consider your credit score, credit history and debt-to-income ratio -- including not just the mortgage, but any auto loans, student loans, credit card or other debt you may be paying off -- in determining whether to issue you a loan, how much to approve you for and the details of the mortgage itself. The less impressive your financial history, the riskier you are as a borrower, and the lender will want to see a higher down payment or higher interest rate to offset the risk.
But even if you don't see your credit score drastically improving over the next year, there are other things you can do to make yourself a more appealing financial investment to lenders. Paying down student loans and getting rid of your credit card debt can do a lot.
"[Consider] a borrower with a maybe average credit score but is putting 5 percent down, and then their total debt-to-income ratio is 36 percent or 35 percent," Zimmerman says. "That presents a better risk than someone who has maybe a 41 percent or higher debt-to-income ratio."
You can't get the house you want. Many first-time homebuyers should approach their starter home with reasonable expectations. After all, the chance your first house is a 10-bedroom mansion with an infinity pool in a gated community is pretty slim.
Still, if your budget or the local real estate market make it so you'd be unhappy living where you can afford, it may be best to wait until you've saved more money or the right property comes onto the market.
If you're holding out for the right property, stay connected with your real estate agent and have your financials ready to be able to put in an appealing offer with mortgage preapproval quickly. The more prepared you are, the better your chances for success.
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