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How to know if it’s time to buy a home

Owning your own home has long been part of the American dream. It’s a goal most of us rightfully aspire to, and one that can often help build wealth. Indeed, 64% of Americans own a home today. If you’re considering buying a house, you’ll want to look at a few things first, such as your overall financial picture and the total cost of home ownership. You’ll also want to understand current interest rates and home market prices.

We’ve all heard the rule of thumb that you should ideally have 20% of the purchase price saved for a down payment on a home. Although you can qualify for FHA mortgage loans with as little as 3.5% down, a 20% down payment is still a much better idea, because you won’t need to pay private mortgage insurance, will have lower monthly mortgage payments, and will pay less interest over the life of the loan. You’ll also be less likely to end up underwater on your mortgage should housing values decline.

So, one way of gauging when it’s the ideal time to buy a home is when you can afford a 20% down payment on the home of your choice. But wait — you’ll also need to factor in other costs, such as insurance, closing costs, moving costs, repair and maintenance, property taxes, and so forth. Use a mortgage and housing cost calculator to determine whether you can still afford your home when all these costs are combined.

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