Buy Now or Wait: The Honest Math

The guide in brief

Buy now or wait: the guide in brief

Here is a plain summary of the main points in Buy Now or Wait: The Honest Math. The full guide goes further and ends with the questions to ask before you decide. It does not tell you to buy and it does not tell you to wait. It shows the arithmetic so you can decide for yourself.

Arithmetic, not a prediction

Nobody knows where rates or home prices go next, and anyone who claims to is guessing. The guide makes no forecast. It sets out the math a lender actually uses, so you can weigh your own situation with clear eyes instead of reacting to a headline.

Lenders size a payment, not a price

A lender does not start from the price of a house. It starts from a monthly payment and works backward, comparing that payment, together with what you already owe each month, against your income. That is why two people with the same salary can afford very different homes: the one with fewer monthly debts has more room for a house payment. Your savings and your credit are read alongside it.

Why buying power moves when rates move

Because the payment is what gets sized, a change in rates changes the loan that fits the same comfortable payment, and often by more than people expect. When rates rise, the same payment carries a smaller loan; when they fall, a larger one. That is why the same salary can buy a different house in a different year even when prices barely move. A later drop in rates would help, but nobody can promise one, and refinancing has its own costs.

The honest case for waiting

Sometimes renting and saving really is the better move, and a lender who only ever says buy is not being straight with you. Good reasons to wait include planning to move again soon, an emergency fund that is still thin, income that is not yet steady, or a payment that only works on paper and leaves no room for real life.

The old rule of thumb

A generation ago, people sized a home by multiplying their yearly income by a small, fixed number. Prices have moved a long way against incomes since then, so that rule describes a market that no longer exists. The honest test today is the monthly payment and the cushion it leaves you, not a multiple of your salary.

Run your own number

You can do this on the back of an envelope before anyone tells you what you can afford:

• find the monthly payment that fits your life comfortably, not the most you could be offered;
• count what you already owe each month before any house payment;
• keep a real cushion of savings after closing, not just enough to get in the door;
• compare the full cost of owning, including taxes, insurance, upkeep and any association dues, with the full cost of renting, honestly.

Questions to ask before you decide

Ask what payment actually fits your budget, not just the largest one on offer; what happens to your number if rates move a little either way; whether, given your situation, there is an honest case for waiting; and which costs people tend to forget when they compare buying with renting. The worst time to run these numbers is after you have fallen for a particular house.

To see what a monthly payment works out to for a price you have in mind, try the mortgage payment calculator, or read buying a home for the programs, documents and steps to closing.