Is now a good time to buy a house? These 5 questions will help you decide

Prospective homebuyers are up against a lot this year.

The average home sales price in the first quarter was 32.4% higher than the same period in 2020, right before prices skyrocketed in the pandemic, according to the U.S. Department of Housing and Urban Development. Meanwhile, mortgage rates are hovering in the 6.3% to 6.4% range.

Still, there are some bright sides to the market trends that make it a relatively good window to buy in many places throughout the country. For example, while homes are more expensive than they were six years ago, prices are coming down from the record highs reached in 2024 and 2025. And because rates are higher than expected, many would-be buyers are holding off on selling, which is lowering the competition.

"We're in this period where homes are becoming more affordable and homes are spending longer on the market, so buyers just have a lot more power," Joel Berner, a senior economist at Realtor.com, told CNBC Select.

The market trends that exist today — limited listings and high prices — are not going away over the next few years, Berner said.

"The reality is we're still in a housing shortage," Berner added. "I wouldn't hesitate [to buy] because you're expecting next year to be better, or two years from now to be better."

That's because buying now can help you avoid the demand and competition that could come later with lower rates, he said.

"People talk about FOBAT (fear of buying at the top) and I think that's valid, but I think that there's a corollary to that — that people should think about, too — fear of missing the dip," Berner added.

Beyond the immediate market trends, he echoed what housing experts repeat throughout the housing cycle: it's less about where the market is at and more about where you — as the buyer — are financially.

"When it meets your needs and meets your budget, just buy the house," Berner added. Below, CNBC Select helps you decide whether it's the right time with several important questions you should ask yourself. Plus, we run through how to pick the best mortgage.

If you decide to buy a home, it could be the largest purchase you'll ever make. A major money decision like this should come with a lot of discernment, including this very important question: why do you want to buy a house?

Here are some common reasons:

• It's an investment. The value of a home typically increases over time, meaning that if you hold onto it for a significant term, it will accrue value that you can tap into or gain from a sale. Over the past 30 years, the average sales price has skyrocketed 219.43%. A person who owned the average-priced home in Q1 of 1996 had a home valued at $161,100.The person who owned the average-priced home in Q1 of 2026 had a home valued at $514,600, according to Federal Reserve Economic Data (FRED).

• It's more affordable and predictable than renting. You may decide that buying is a better deal where you live. While buying may be daunting, renting comes with its cons too, Lawrence Yun, chief economist at the National Association of Realtors, told CNBC Select in January 2023. "Not buying means renting, and the rents continue to rise, rise, rise." But don't just assume that becoming a homeowner will always be cheaper. Calculate whether potential home maintenance costs and other expenses will offset what you'd have to pay in rent.

For decades, experts generally discouraged those planning to own a home for less than five years from buying a home. But this year, with higher mortgage rates and home prices compared to the 2000s and 2010s, housing experts say homebuyers should plan to own a home for at least a decade to make the purchase worthwhile, according to a December analysis from Realtor.com.

Be sure to think critically about whether you can reasonably expect to stay in the same area for the next decade; if not, you probably want to wait to buy a home until you can.

Before you start shopping for a home, check to make sure you can meet these conditions:

You can show you've had a well-paying, consistent job for two years or more

Mortgage lenders want to see at least two years in the same job — or at the very least the same field — through paystubs and W2s.

But if you work for yourself, don't worry. There are non-QM mortgages specifically for those who have had consistent income through a non-W2 job, like a landlord, self-employed person or freelancer.

You have enough saved up for a down payment, closing costs and an emergency fund

Before you start your homebuying journey, you need to have a significant amount of money in your bank account to cover these costs:

• Down payment: Most lenders require at least a 5% down payment for a conventional mortgage. You'll have to put 20% down to avoid private mortgage insurance (PMI) in most cases.
• Closing costs: You'll have to pay 2% to 6% in closing costs for line items like lenders' fees, origination fees, underwriting fees, appraisal fees, title fees, title insurance fees, legal fees and more.
• Moving costs: Chances are you'll need movers to help you make it into your new home. Make sure you've saved enough to cover those costs.
• Three to six months of housing payments: Lenders also usually want to see that you have enough money leftover to make three to six months of mortgage payments if there is a financial emergency.
• Extra savings for any furnishing or renovations you may need: This is not essential but you'll probably find things around your new home that need to be touched up or furnished, and you'll want to have funds to make it happen.

If you've got the money ready, put your savings in a high-yield savings account to ensure they accrue as much interest as possible while remaining easily accessible.

You have paid off high-interest debt

You don't need to be completely debt-free to buy a home. It's generally acceptable if you're not finished paying back low-interest debt, like student loans, by the time you apply for a mortgage. So, how much debt and what kind of debt are OK? Let's break it down:

How much debt can you have when you apply for a mortgage?

Lenders typically want to see a debt-to-income ratio of 43% or lower, including a mortgage payment. For example, if a person brings home $10,000 each month, a lender will want to make sure they're putting no more than $4,300 toward all debt, including their mortgage payment.

However, you should aim to keep debt payments below this each month to ensure you have enough money left over to cover key necessities. A popular affordability guideline is the 28/36 rule, which states that no more than 28% of your gross income should go toward housing costs and no more than 36% of your gross income should go toward debt, including your mortgage.

Going back to the example of the person who brings home $10,000 a year again. If this person followed the 28/36 rule, it would mean they would put no more than $3,600 toward debt overall each month (including their mortgage payment) and no more than $2,800 toward their mortgage payment. If they put the full $2,800 toward their mortgage, they'd have $800 left over to pay for other debts.

How to manage debt before you start shopping

The average American makes nearly $1,600 in debt payments each month, according to LendingTree.

It's important to be sure you optimize your debt before you start home shopping. Do that by paying down high-interest debt, like credit cards, before applying for a mortgage. One possible solution is getting a balance transfer card or a debt consolidation loan.

You have primed your credit

Lenders typically want to see a credit score of 620 or higher.

While it's possible to get a mortgage with less-than-perfect credit — especially with a government-backed FHA loan, which requires a 500 minimum credit score — you'll probably be stuck with a higher interest rate.

A few extra percentage points can cost you thousands of dollars over the life of the loan and decrease your buying power. Keep an eye on your credit with a free credit monitoring service, such as Experian free credit monitoring. If your credit needs work, take some time to improve it by keeping your credit utilization low and paying down high-interest debt.

You've determined you're on top of your financial health. Now it's time to figure out how much house you can afford.

Here at CNBC Select, we like to use the 30% guideline to figure this out, since that's what the Department of Housing and Urban Development uses to determine whether housing is affordable.

That guideline states that you should not spend more than 30% of your gross monthly income (income before taxes) on all housing costs, including your mortgage or rent, housing insurance, mortgage insurance, utilities and property taxes. To figure out how much this is for you, use this formula:

• Monthly housing costs ≤ 0.3 x gross monthly income

After you figure out what that is, use our mortgage calculator to figure out how much home that budget can buy you in your area.

Finally, when you've got your financial house in order and know your budget, you can start considering which mortgage lenders are best for you.

Here are the most common types of mortgages:

• Conventional loan: The most common type, this loan is backed by a private bank and not a government institution. Typically, you need a credit score of 620 and a down payment of at least 5% (20% if you want to avoid private mortgage insurance).
• FHA loan: This is a mortgage backed by the Federal Housing Administration. It requires a 3.5% down payment with a credit score of 580 and 10% with a credit score of 500.
• VA loan: A home loan backed by the Department of Veterans Affairs for veterans and active-duty service members. It is a 0% down payment loan with no PMI required. Borrowers must have a credit score of 620 or higher.
• USDA loan: This United States Department of Agriculture-backed mortgage is a zero-down-payment loan for homebuyers purchasing certain homes in some rural and suburban census tracts. Borrowers need to have a credit score of 620 or higher.
• Jumbo loan: This is a private loan that exceeds the conforming loan limit — $832,750 in most areas and $1,249,125 in high-cost areas.

When you decide which mortgage is right for you, think about what you want out of a lender. Here are some of our top picks.

Best for customer experience: Rocket Mortgage

Why we love Rocket Mortgage: This lender has an excellent record of customer service, receiving top marks from both the Better Business Bureau and J.D. Power. Here at CNBC Select, we love its easy-to-use online interface and the fact that it offers online chat available at a wide range of hours.

Who's it for?

• Those who put customer service at the top of their priority list
• Low-income borrowers who need a low-down-payment mortgage
• Those who want to get to closing day as soon as possible

Downsides: No in-person locations; no USDA loans

Best for first-time homebuyers: Guild Mortgage

Why we love Guild Mortgage: Guild offers a wide selection of uncommon loan types and several down payment assistance programs, making it a great option for first-time homebuyers and borrowers without a traditional job.

Who's it for?

• Those who need down-payment assistance
• Non-W2 borrowers who need flexible requirements
• Borrowers with a thin credit history

Downsides: Does not lend in New York; rates aren't available online

Best for low rates: Better Mortgage

Why we love Better: Better Mortgage is known for its lower-than-average rates, making it a great option for getting the best rate deal.

Who's it for?

• People prioritizing low rates
• Those who want a speedy closing

Downsides: No in-person locations; no USDA loans

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every mortgage review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of home loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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