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(Last Updated On: September 20, 2018)

If you’re feeling wary about taking on a mortgage right now, you’re not alone. As reported by HousingWire, nearly one-quarter of Americans think high prices make this is a bad time to buy a home.

On the flip-side, Yahoo Finance has good news on the same front – experts expect home prices to soften this year. While you wait, take steps to put yourself in the best position for buying a home when the time is right.

Why U.S. Homebuyers are Holding Out

Rising prices

As reported by MarketWatch, over the past year, the median home value has risen by more than 8 percent:

“The national median home value is now $217,300, an increase of 8.3% on the year and 8.4% above the bubble-era peak. In 21 of the nation’s 35 largest markets, the median home value is now at an all-time high.”

Why the price hike? It’s largely due to low inventory.

Rising mortgage rates

As though higher-priced homes don’t make affordability challenging enough, consider the impact of rising mortgage rates, too.

Jonathan Miller, president and CEO of real estate appraisal firm Miller Samuel Inc., told Yahoo Finance that “While the rate increases are currently nominal for Americans living paycheck to paycheck, it’s enough to sway a person’s decision to make that home purchase.”

Wages not keeping pace with inflation

It doesn’t help that inflation is growing at a greater rate than the wages of potential homebuyers.

According to Yahoo Finance, “When you adjust for inflation, wages haven’t risen in a decade, experts note. As the lack of inventory drives home prices up, affordability becomes an issue.

“Wages aren’t keeping pace and consumers are priced out of markets by 6% to 8% — depending on which home price index you look at, in terms of home values and wages.”

Fear of another housing bubble

As stated in the report cited by HousingWire, “We suspect memories of the house price crash 10 years ago are also playing a role in the relatively fast build-up in concerns over high house prices…. An understanding that house prices can quickly lose value is making Americans more cautious about buying a home.”

What to Do While You’re Waiting to Buy

1) Improve your credit
While you can buy a home with subprime credit, you’re much better-served taking the time to improve your credit score first. Otherwise, you’ll be looking at a much higher interest rate that will dramatically increase the cost of your loan.

To improve your credit before buying a home:

2) Do the math
How much home can you really afford? Use our mortgage calculator to figure your monthly payment – and overall loan cost – based on a specific interest rate.

3) Save your down payment
Aim for saving 20 percent for your down payment. Anything less than that may mean paying more, either in the form of higher interest or private mortgage insurance (PMI).

Fortunately, renting right now has its perks in this department.

As reported by MarketWatch, “The median rent nationwide only increased 1.3% over the past year to $1,440, marking the second straight month in which rent appreciation has fallen below the overall rate of inflation.”

In other words, as much as you may dislike renting right now, with rent appreciation falling below the rate of inflation, you’re in a better position to save more.

4) Educate yourself about mortgages
One of the biggest mistakes homebuyers make is going into the process unprepared. This not only means making uninformed decisions; it can also make an already stressful process even more challenging to navigate. So, do yourself a favor and make sure you can answer all the following questions before delving in.

Before You Buy

  • Do you know how to improve your credit first?
  • Do you know the best type of mortgage for you?
  • Do you know how to figure the real cost of your loan?
  • Do you understand underwriting guidelines?

After You Sign on the Dotted Line

  • Do you know how to pay off your loan early?
  • Do you know the alternatives to foreclosure?
  • Do you know how loan modifications work?
  • Do you know how to spot mortgage relief scams?

Find answers to all these questions (and more) in our comprehensive guide to mortgages.

While you may not love waiting to buy a home, it really is in your best interest. Take advantage of all these good things you can do in the meantime to put yourself in the best position once the time is right.