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Home ownership represents the American Dream! It means having control, success, and excellence. However, there are several reasons why you should hold off on buying:
1. Buying is more expensive than renting: In the college town that I rented a house in, my rent was $650 for a three-bedroom house. Yes, I probably could have bought a house and had the mortgage payment be far less, but there are most costs to home ownership than just the principal and interest. There are taxes, insurance, maintenance costs (including buying a lawn mower and tools), as well as all of the stuff you will “need” to fill up the house. Home ownership is no easy adventure.
2. You need to move in the near future. If you (or your spouse) are in the military, college, or another profession in which you move around a lot, buying a house may not be for you. Most experts recommend owning a house for at least 5 years before selling in order for it to be worthwhile.
3. Your credit needs work. If your credit score is below excellent (720), then chances are you will have a higher interest rate from the bank, which means you will pay more interest on the loan. Worst case scenario is you are denied the mortgage! You do have the option to pay the loan off early, but let’s face it, most people do not have the discipline to do this!
4. You cannot put at least 20% down. When you put less than 20% down on a house, you are charged Private Mortgage Insurance (PMI), which can add up to hundreds of dollars in premiums each month. More money = bad!
Even though house prices have dropped and interest rates are at an all-time low, all of these are reasons to raise a red flag before you decide to buy a home. A home is more than just a mortgage payment – be it positive or negative and is not something to be taken lightly.
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Thanks for leaving the tip for military people. Another tip for military home buyers is to not buy a home based on their current housing allowance, but based on what they can truly afford. That way if they relocate, it won’t matter if their housing allowance drops lower in a different state, because they will be able to afford to keep their home.
Absolutely! This goes hand in hand with the basic principle of living below your means. Just because your BHA is a set dollar amount that doesn’t mean you have to spend all of it!
Agreed on 2 and 4. I’m not so sure 3 applies so much over here (UK). Generally if your credit is bad then you just can’t get a mortgage, they don’t fiddle the rate, as far as I know anyway.
Shouldn’t 1 be “buying is more expensive than renting?” or am I being stoopid?
Haha, you are so right! How did I not catch that!
Ha ha, I thought I was going mad for a minute there. Glad to be of service :)
Definitely a good start to if one should buy a house or not. I think numbers 3 and 4 take some effort and financial planning – especially that 20% down!
other than #2 i totally disagree (respectfully) – as long as you can put 20% down and your cost is around 25% of your monthly bills it is such a better deal to buy – rental costs will continue to go up, but if you can get a fixed rate that is affordable for you it is way better to buy long term.
Definitely true! A house is definitely an asset when handled responsibly :_)