How do you know if you are ready to buy a home?

by Dan Krell

Did you know that we are in the midst of the best home buyers market in since the 1970’s? Real estate guru and national speaker, Bernice Ross (, thinks so and that’s why she proclaimed 2008 as the “best buyer’s market in thirty five years!”

Ms. Ross asserts that the combination of low interest rates and high inventory makes this real estate market prime for home buyers. She supports her claim by explaining that interest rates have not been this low since the seller’s market of several years ago (when inventory was very low) ; and previously in the 1970’s. Additionally, mortgage interest rates during the previous major home buyer markets were much higher (18 to 20% in the early 1980’s and about 11% early 1990’s).

Certainly, it may seem to be a time filled with home buyer opportunity: Housing inventory is at a level unseen for years, giving home buyers many homes to choose from as well as negotiating leverage in neighborhoods filled with homes for sale. Additionally, interest rates are relatively low making homes more affordable. Furthermore, home buyer tax incentives (including the recent tax credit of up to $7,500) as well as rising area rents may make home buying a viable alternative.

Would economic turmoil put a damper on the excitement that would otherwise be generated by “the best home buyer’s market in thirty five years?” Some financial commentators say “yes.” For example, Luke Mullins states that you should not buy a home unless you have a compelling reason to do so (, August 14, 2008). Steve Kerch of The Wall street Journal’s Market Watch (, September 24, 2008) reported that the best indicator of economic confidence is the purchase of a home.

The truth is that “the right time to buy a home” depends on the home buyer. Relying on broad sweeping statements (positive or negative) about the real estate market may not be helpful. Many personal and regional factors need to be considered and assessed. Before you decide to buy a home, you might want to examine such issues as (but not limited to) your personal and financial goals, your current financial condition, and your career outlook.

The question, “How do I know if I am ready to buy a home?” is answered by HUD’s ( “100 questions and answers about buying a new home.” If you can answer yes to the following questions, HUD believes you may be ready to buy home: Do you have a steady source of income? Have you been employed on a regular basis for the last 2-3 years? Is your current income reliable? Do you have a good record of paying bills? Do you have few outstanding long-term debts, like car payments? Do you have money saved for a down payment? Do you have the ability to pay a mortgage every month, plus additional costs? Other experts add these questions as well: how long do you intend to stay in the area, do you have emergency funds available, are you ready for the responsibility of homeownership, and do you live within your means?

In addition to consulting with your personal financial adviser and accountant, HUD recommends you attend home buyer counseling to help you determine if you are ready to buy a home.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of October 13, 2008. Copyright © 2008 Dan Krell.