One person's hand handing over house keys to a second person's waiting hand.

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The housing market is red hot right now. That's exciting news for sellers, but what about buyers? How can you know it's the right time to buy a home? Whether you're considering homeownership for the first time or wondering about moving to a new place, here are five signs it's time to buy a new house.

1. You qualify for low interest rates

When it comes to buying property, interest is king. Not only does a low interest rate decrease your mortgage payment, it can also save you thousands over the life of your loan. Consider this: As of this writing, mortgage rates for highly qualified buyers hover around 2.8% on a 30-year mortgage. We've compared interest payments on mortgages of 2.8%, 4.8%, and 6.8%. 

For the sake of illustration, let's say you purchase a $300,000 property with a 30-year mortgage. Here's how your interest payments will look if you put 20% down, and borrow a total of $240,000:

Interest Rate

Monthly Principal & Interest Payment

Total Interest Paid










Data source: Calculations by author.

This table gives you a good idea of how much a low interest rate can save you. You'll need a strong credit score, regular income, and low debt-to-income ratio to qualify for the best rates.

As a reminder, your monthly payment will also include taxes, home insurance, and -- if you put less than 20% down -- private mortgage insurance (PMI). Use our mortgage calculator to get a better idea of your monthly mortgage costs.

2. You're ready for a larger (or smaller) space

It may be time to buy a smaller, more manageable home. Perhaps your kids are grown, or you're sick of taking care of a house that's larger than you need. On the other hand, if your home feels small and claustrophobic, it may be time to purchase a bigger one. 

Whether you want something smaller or larger, make sure it makes financial sense. 

Rising property prices mean you may be able to sell at a higher price, but you'll likely have to pay more for your new home too. 

If you have a property to sell, speak with a real estate agent to learn how much money you can realistically expect to receive. You'll need enough to make a down payment, cover your moving costs, and leave you with an emergency fund

One other consideration: If you don't need the proceeds from your current home to buy another house, consider keeping it as a rental property. Being a landlord is not always easy, but it can provide an excellent source of income. 

3. You are house poor

Being a homeowner can be expensive. You're sailing along without a care in the world when suddenly your central air goes on the fritz, or your water heater dies. Homeownership means never knowing when something will break or when you'll have to pay for repairs in addition to your monthly mortgage payment. 

If you spend more than 30% of your income on housing, it may be time to buy a home that won't keep you awake at night. That could mean purchasing a smaller home or a condo that includes maintenance. Selling a house that has become an albatross around your neck doesn't mean you have to go back to renting. It just means finding a property that gives you a little more breathing room, financially speaking. 

4. You take advantage of a low down payment loan

If you worry that you'll never be able to save enough for a down payment, an FHA loan allows you to get into a home with as little as 3.5% down. USDA loans (for eligible rural and suburban homebuyers) are available for as little as 0% down.

As long as your credit score is in decent shape, you might be able to buy. Investigate down payment assistance programs, and, if necessary, take steps to improve your credit score. For example, the minimum score for an FHA loan is 580 (or 500 if you can make a down payment of 10%). The minimum credit score most lenders require to underwrite a USDA mortgage is 640. 

5. It's the right move for your priorities

Sometimes you need to live somewhere new. Maybe you realized mid-pandemic that life is too short to be away from family. Perhaps you want to switch from a multilevel home to a ranch. Or you want to build a home that perfectly meets your specifications. Who knows? You may buy a duplex and use one side as an investment property. 

There are many reasons for buying a new house. Whatever you decide to do, make sure it fits your budget and shop around different mortgage lenders to find the right deal. The best moves are the ones that allow you enough wiggle room to enjoy yourself.