With economies and home markets all over the United States fluctuating regularly in response to the evolving realities of the pandemic, it can be hard to determine whether or not it’s the right time to buy a house. It’s important to note that the answer to that question depends upon a number of factors, many of which are personal. There are still, however, many wider market trends that may influence your decision on your readiness to purchase a home in Delaware. Today we will review some of these trends, and we will also offer a personal checklist to help you assess your own home buying readiness.
Zillow indicates that the Delaware home market remains strong. The value of the typical middle price tier home in Delaware was rated at $277,979 as of November 30th, 2020, which is up 7.8% from the previous year. Even during COVID-19, Delaware’s home market continued to appreciate. In December 2019, Zillow rated the typical middle tier home value at $258,000, and as of December 2020, that number had increased to $281,000.
In fact, this trend of home value appreciation in Delaware is predicted to continue throughout 2021 by 10.5%. If this Zillow prediction comes true, the value of a middle price tier home in Delaware would be at $307,000 as of November 30, 2021. Looking at the history of Delaware’s home market, it’s interesting to note that house values have been continuing to appreciate ever since early 2013 with only a couple minor dips. In February 2013, the average home value for a middle price tier of home was $208k, meaning that the market has appreciated by $73,000 in a little less than eight years’ time.
While no home market predictions are ever certain, historical rises in Delaware’s home values even through difficult economic circumstances seem to indicate that purchasing a home in Delaware may be a good investment.
Mortgage rates vary depending on the size of your down payment, the total cost of the house, the term of the mortgage, and your credit score. For a fixed rate mortgage with a 30-year term, the average Delaware mortgage rate is at about 3.84%. (If you would like to calculate your own estimated interest rate, be sure to reference our Blenheim Homes mortgage calculator. If you would like detailed information on your particular mortgage rate, feel free to contact one of our preferred lenders.) It’s also important to note that Delaware offers several home ownership assistance programs.
Of course, purchasing a home involves more than just the up-front cost. Another consideration as you assess your readiness to purchase a Delaware home is that Delaware has the seventh lowest property tax rate at 0.56%. Compare this to the average national property tax rate of 1.1%. In other words, Delaware’s current property tax rates make owning a home after the initial purchase less expensive than it would be in many other states.
At the end of the day, two of the biggest factors in whether or not it’s a good time to buy are your individual situation and your goals. It is certainly important to assess the stability of your local economy, the trends in the housing market, home interest rates, and state property taxes. But ultimately, your optimal home buying timeline is personal. Below is a checklist to help you assess whether or not you are ready to purchase a home in Delaware:
The first step to ensuring that you are ready to buy a home is to assess your ratio of debt to income. Each lender has different requirements, but in general, Investopedia states that lenders like to see 36% or less of your monthly income going toward paying off debt, and that includes your mortgage. In fact, no more than 28% of your monthly income should go toward your mortgage. That means that only 8% of your income should go toward paying off student loans, car loans, credit card debt, etc., unless the rate you’re paying on your mortgage is less than 28% of your income.
In addition to having a solid debt-to-income ratio, you should also have a healthy savings account for a down payment. Just how much do you need for a down payment? It depends on your mortgage. Some, like the FHA Mortgage, require as little as 3.5% down, but in most cases, you’re likely to need a minimum of 5% down. As of September 17, 2020 Rocket Mortgage reported that the average number Americans put down for a house payment was 6% of the home’s cost. While it isn’t necessary to put down 20%, be aware that the higher the down payment, the lower the price you’ll pay on your home and the lower your interest rate is likely to be.
You’ll also need to have a good credit score as you apply for your home mortgage. Again, the precise number you need on a credit score depends on the type of loan you’re getting, but it’s smart to aim for 760 or higher. Keep in mind that 300 is the lowest credit score and 850 is the highest credit score possible. If you don’t know your credit score, you can check it here. (Learn more about loan options, including conventional loans, jumbo loans, FHA loans, VA loans, and USDA loans here.)
So you’ve assessed your debt-to-income ratio, your savings account, and your credit score - what else do you need to do? We recommend assessing your job security. As you prepare to purchase a home, you should feel fairly confident that your financial position is stable so that you can have the peace of mind of preparing for the future supported by a stable income.
Finally and most importantly, what are your long-term goals? Do you see yourself investing in your community and settling down in Delaware for the foreseeable future? If so, and if all of your financials are in order, it may be time to act on your long-term goals and purchase your Delaware home.