At some point in an adults life, you receive pressure from those around you to buy a home. However, since the 2008 mortgage crisis homeownership has changed and should be approached with knowledge, preparation and careful consideration.
Here is an article written by my good friend, Tiffany “The Budgetnista”Aliche. It’s thought-provoking and might have you questioning whether or not buying a home is right for you at this time.
Before we get started it’s important to always remember that a house is an investment. Don’t let anyone tell you otherwise. If you’re not going to make money in the long-run, it’s not a good idea.
The Budgetnista Buying a Home Checklist:
1. The mortgage is rentable.
That means if times get financially rough and you have to move out to a cheaper apartment/parent’s house/friend’s couch, could you rent out your home and COMPLETELY cover your mortgage, taxes & insurance etc.? Figure this out by comparing rents of similar homes in the area where you are considering buying and structure your deal to make your mortgage the same or under what those homes rent for.
Getting your rent down to rentable might involve you putting down a large down payment, reducing how much you pay for a home, or paying for points to reduce your interest rate etc.
2. You plan on staying in that location for awhile.
Unless you’re buying an investment property, you should be reasonably sure that you’re ready to lay down roots in a specific location before buying a home there.
3. There is no big-ticket item / experience you’d like to have 1st.
Once you get a house, that dream travel-trip, hot car, new business venture etc, may have to wait. The money you once had in excess will probably be greatly reduced during the 1st few years as a new homeowner.
4. You’ve consulted your future, MONTHLY budget.
This is the budget you’ll be living on once you own a home. After doing said budget, ask yourself, after all of your expenses are taken care of…AND I MEAN ALL (new & old bills, utilities, new home expenses, entertainment, groceries etc.), will you still have money left over to save?
You should. Do the math. If your current income won’t cover your future expenses and leave you with money left over to save, you can’t afford to buy a home.
5. You’re currently saving your new (home) expenses each month.
If you really want to know if you’re financially ready to buy a home, begin paying your mortgage and new home expenses to yourself in a savings account now (minus your rent). If you can’t pay a mortgage now, then you won’t be able to “magically” pay your mortgage later.
6. You LOVE or at least like your job.
If you own a home and hate your job, it will be very difficult to leave a steady paycheck (despite the soul-crushing stress), because of your financial obligations (mortgage). If you don’t love what you’re doing and are renting, you can always leave for something you like more, but pays less, because moving to a cheaper place is a solution. Although it’s a hassle, moving is much easier when you’re renting.
7. You make sure it’s something YOU really want.
I bought a home because I thought it was what I was “suppose” to do as a responsible adult (25 at the time). Not so. There’s nothing wrong with renting. It’s NOT throwing your money away. Renting allows you more financial freedom. It’s because I’m renting that I was able to start my business and still travel the world. Buying for the RIGHT reasons is good too though.
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