Many people swear by home ownership; Some call it a form of “forced saving” while others see it as a way of building intergenerational wealth. Buying a home has long been considered one of the best ways for medium-sized businesses to gain access to social mobility. This was particularly true before the first index fund was founded in 1976. As people built up equity in their homes and passed it on to their heirs, this enabled families to build up generational wealth.
However, despite the many benefits of buying a home, it doesn’t mean it is always a good decision. For example, existing home prices rose at a record breaking pace 17.2% in March 2020 compared to March 2019. With record-breaking prices, homes are cheaper than ever.
This gallery covers the specific reasons why you shouldn’t buy a home now despite the buying craze. Instead, it may be a better choice to wait for the market to stabilize.
Last updated: May 24, 2021
1. You are in a hurry to buy
Lots of people seem in a rush right now, but that could pose a number of challenges. For example, you could make unnecessary compromises when looking for a home. Again, all homes will likely have at least a few features that you could do without, but you may find one in a more convenient location or one that has more of the features you want.
In addition, many houses are currently having bidding wars. If you make an offer, there is a good chance it won’t be accepted and you’ll just get frustrated. While it’s not uncommon for your offer not to be accepted, there are stories of people who put forward offers for 15 or more homes and are still left empty-handed.
2. You don’t have (much) cash on hand
As you may know, it is common practice to pay a 20% deposit when buying a home. It may be possible to buy with less money, such as an FHA loan that can drop you 3% or a traditional 5% loan. But these may not work to your advantage, says Andrea Woroch, Consumer and money saving expert. “If you cut your home purchase by less than 20%, 2 things happen – 1. You have to pay a monthly private mortgage insurance (PMI) fee, which is just a total waste of money) and 2. You can get a higher interest rate and yours monthly payment is higher thanks to a higher interest payment. “
3. You cannot afford mortgage payments
Whether it’s because your dream home hits the market unexpectedly or just because of the higher prices we’re seeing, there are many reasons why you might be tempted to buy more home than you can afford. But that could be the wrong step, says Chuck Meier, SVP, Mortgage Sales Director at Sunrise banks. “First of all, you should be sure that you do not have to rely on cash for a monthly mortgage payment. If you are paying more than 30% of your monthly income for a mortgage, it may not be a good buying decision. A mortgage that you cannot afford will hurt you in the long run. “
4. Buying a home makes you “poor”
If you’ve never heard of “house poverty” it means you are spending so much on your mortgage and other household expenses that you have very little left at the end of the month. As a result, other financial goals can be difficult to achieve.
This can happen for a number of reasons, such as: B. by living in an area with housing costs – or by prices that are higher than usual in the current market. Another possible reason is that it does not take into account the real cost of owning a home. Either way, you don’t want to delay your other goals by buying a home.
5. You don’t have an excellent credit score
For the few who pay for their home in cash good credit is not a need. But for the rest of us, building your credit in the years leading up to applying for a mortgage is important. “That’s because lenders check your creditworthiness and your credit record to determine your creditworthiness and the likelihood of you paying back your mortgage loan,” Woroch said. “The better your credit, the easier it is to qualify for the best loan terms and the lowest interest rate.”
6. You (already) have a lot of debts
Signing a mortgage is the greatest debt most consumers will ever have. However, if you already have large debts, adding a mortgage can make things even more complicated. This is especially true when you are struggling with your existing debt. “A mortgage usually has a term of 15 to 30 years,” says Dan Demian, an expert in financial advice Albert. “For many of us, it’s longer than anything we’ve set out to do in the past. If you’re struggling to get your car, credit card, or loan payments on time, reconsider a major obligation like a home until your debt is under control. “
7. You don’t have an emergency fund
A sufficient one Emergency fund is extremely important for several reasons. If you do not currently own a home and have no (or insufficient) emergency fund, this may not be the time to buy. After all, when you own a home, unexpected expenses are expected and you are on the hook to meet them. “After you get the keys to your dream home, you are often surprised with additional bills that suddenly require your attention,” says Demian. “Whether it’s property taxes, HOA fees, lawn care / maintenance, or house maintenance (like a new roof or stove), it’s important to have a supply of cash to afford and maintain a home. ”
8. You cannot find a home that suits your needs
This may seem like an obvious point, but it is particularly appropriate right now. It is unlikely that there will ever be a home Perfect and meet all of your needs, but you will find that the choice is particularly sparse depending on where you live (or where you live). “There are always cycles and sometimes the answer can be to wait for the right house to hit the market at the right time,” said Jess Kennedy, co-founder and COO of Beeline. “That is not to say that you should look no further or bid on houses. It is important that the emotions of the home search process do not outweigh good decision-making.”
9. You already own a house
There are certainly many reasons why existing homeowners choose to buy, such as: B. a growing family, but there are also reasons to consider staying there. For example, a caller to a recent one episode of “The Takeaway” by WYNC Studios bought a house in February 2020 and sold it shortly afterwards. She sold it for $ 60,000 more than she paid for. The problem? The same housing shortage meant that she could not find a new home that met her needs.
Although she eventually found something, she had to make offers for 17 apartments before one was accepted, and she paid more for the second apartment than the higher price she got for the first. If you already own a home and don’t have a new one planned, wait for the market to calm down.
10. It just seems like the right thing to do
The escape from overcrowded cities to the suburbs and even the country is on everyone’s lips. You might be thinking, “Maybe I should move too!” After all, you probably should, too, if everyone does, right? In reality, while this is the right step for others, it doesn’t necessarily mean it is the case for you. If you’ve been wanting to get away from the city for a long time, this may make sense, but make sure it is the right move for you. After all, buying a home is a big, long-term decision. It should never be a spontaneous decision.
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