The housing market has continued to give prospective buyers headaches from high rates to soaring prices.
Homeownership remains a quintessential part of the American Dream, but more individuals and families are finding that goal elusive.
While many buyers have found themselves stuck in real estate no man’s land, personal finance expert and "What Should I Do with My Money?" author Bryan Kuderna explained how to know when it is time to buy a home in a Fox News Digital exclusive.
"People need to be financially savvy. They have to understand they can still become a homeowner. And they've got to understand some of these questions to ask themselves how to get there, and be confident in doing so rather than just keep kind of putting off one of their biggest goals," Kuderna said.
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Kuderna outlined several key questions homebuyers should ask themselves before committing to the long-term purchase.
"We've all seen in the news how quickly the prices of homes are rising across the country. But we're also seeing how rent is also going up very rapidly, even faster than the rate of wage increases. So that begs the question: when is the right time to move from a tenant to a homeowner?" Kuderna posited.
"Buying a home is one of the biggest investments, if not the biggest financial decision that you may make in your life. So it does deserve a lot of careful consideration."
The first question buyers consider is what their credit score is and what loan opportunities come with it. Kuderna advised scores of at least 740 are ideal for new buyers as it often comes with better borrowing terms.
On top of credit, prospective buyers should get pre-approved before beginning the home shopping process.
"[Getting pre-approved] is often the first step in becoming a homebuyer or starting the process to shop for a house. You can see how much of a mortgage, how much of a loan you can get, and then that can at least give you some frame of reference of how much house you can be buying, and then familiarize yourself with the 30% rule," Kuderna said.
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When evaluating homes, Kuderna adds that buyers should consider the 30% rule and be prepared to own the property for at least five years.
The 30% rule is a way to determine how much a buyer could spend a month on mortgage payments, Kuderna explained. A good rule of thumb for homeowners is to keep monthly payments at 30% or less of their average income.
"There’s a lot that goes into buying a home from your down payment, closing costs, the way they amortize a mortgage, where so much of your payment early on is purely going to interest that you don't want to have to turn around in a few years and sell, and then find out that you hardly even got your money back and you paid all these additional costs along the way. A home is a long-term investment."
Other factors that will help buyers know if they are ready to get a home include owning life or disability insurance, having an emergency fund separate from your down payment and having little to no "bad debt."
"If they do not have cash available, sometimes we'll see folks that rely on credit cards or other financing, and before you know it, they’re house rich and cash poor," Kuderna shared.
"You do not want to be swimming through credit card debt that you've yet to clean up. If you have any outstanding credit card debt that you can't seem to get out of the way, it's best that you erase that first before you take on such a big loan as a mortgage."
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Lastly, Kuderna emphasized that buyers should ensure their price range is based on a reliable annual income and not "committing to a payment based on just one banner year."
When considering whether to buy a home, Kuderna advises shoppers to also evaluate personal circumstances as well as financial.
Most Americans recognize homeownership as a "key part of the American Dream," but there are also a number of tangible benefits prospective buyers should also consider.
"A key part of the American Dream is to become a homeowner. And there are a variety of benefits of being a homeowner versus being a tenant, the most obvious of which that you hear a lot of people say is 'I'm tired of paying my landlord's mortgage,'" Kuderna said.
"If someone does become a homeowner, now they are eliminating what may feel like just an expense every month and transitioning into a bit of an investment where they're building equity in this very big asset that is now their house."
Kuderna also noted that building equity into an asset like a home becomes a "forced savings plan."
While there are several factors to consider when looking to buy a home, Kuderna emphasized that buyers can find confidence in making the purchase after evaluating the financial and emotional factors.
"If we have that long-term vision, we might not time the market just perfectly, but we can be pretty confident, historically speaking, that 20, 30 years from today, this house is going to be worth way more than what we're paying for it right now. And so that can give us some peace of mind."
