If you are looking for a way to create years of chaos in your life, buy a home for the wrong reason. There are things you can do in life – drop out of college, break up with the right person – that can be fixed with a fair amount of investment in time and money. Buying a home because your brain is not in gear has not quick fix, no matter what you may think. So this list is to help you avoid diving headfirst into quicksand. Ignore it at your own peril.
1. Failure to Do the Math
I’m not someone who likes math, mainly because for some reason the simplest projections, like the monthly budget, always end up higher or lower when the end of the month comes around. So when you are doing your calculations about living in your current place versus buying your own home, simply do the math first. If you wonder about this logic, ask yourself if your significant other will hate you more for not moving or for putting them in a situation that will hang over your heads for years.
Yes, rent prices are going up across the country, but buying a house that has a mortgage payment that is twice as much as your rent makes no sense unless you can positively, definitely afford it. Keep reading for ways to know if this is actually true or not.
2. You have to beg, borrow and steal to get the down payment together
If you have to go to extremes to get the down payment together, you’re already in trouble. If you have no money for a down payment, you’ve advanced to the serious level of trouble. A low down payment means higher monthly payment (with the exception of certain types of loans, such as VA loans) and a higher interest rate on the mortgage. Stop the begging and borrowing, both which are likely to make you more enemies than friends, and wait until you have a 20% down payment ready to go that you saved on your own.
3. Your credit score on Credit Karma forces a shutdown of your device
If your credit score is really that bad you will have zero chance of getting a mortgage. Period. But even if you are in the middlin’ good range you are likely to pay significantly higher interest rates. You will live with those rates for 10 years or more. A higher interest rate means you will have a higher mortgage payment as well – for the next 10 years. If you are thinking of going ahead anyway – good luck.
4. You don’t worry about the fact you change jobs more often than you get your hair cut
While people don’t stay at the same company for 30 years and retire anymore, you need to have a job for more than 6 months – or a series of jobs that only last 6 months each. You may miss a mortgage payment every now and then (experienced homeowners make sure that number stays at zero) but being unemployed or underemployed relative to your mortgage payment is a short road to foreclosure. It seems to be common sense that losing your home defeats the whole point of buying a home in the first place.
5. You are closer to maxing out your available credit than paying it off
Credit card debt is one of the biggest reasons people are in debt. Bankruptcies are an everyday occurrence. Though lenders are likely to move the number of what is an acceptable debt ratio and what is not, if your monthly expenses take up more than 50% of your take home pay, work on reducing your debt levels before buying a house. Even if you buy a newly constructed home, there are 100 unexpected expenses that come with owning a home. Maxing out your credit with no place to turn is a situation that will have you wondering what you got yourself into.
6. Choosing to be willfully ignorant of the local area real estate market
It doesn’t make any difference what people are doing in California or New York City – unless you live there or are planning to move there. The value of properties varies from one geographical area to another. In one area the real estate market can be booming, while 100 miles away it can be in the tank. Real estate markets can be depressed for years (see the Great Recession of 2007) and if you have to sell you are going to take a serious loss. The real estate market is not the stock market.
7. You look at buying a home as a place to live instead of a financial decision
Most people live in an apartment and area they can afford to at the moment. When it comes to buying a house, it has nothing to do with the moment and everything about how you are going to be able to afford to live there 10 years from now. There are no month-to-month leases. For better or for worse, you are going to have to live in and with your decision.
8. You think owning a home and flipping a home are the same thing
They’re not. Most people who flip houses are investors who have a stable place of their own. Ask yourself where you are going to live if you lose the home to foreclosure or have to sell it at a substantial loss.
9. Your lifestyle is one of constant travel
If you saw the movie Up in the Air you know Ryan Bingham hated to return “home” – which was actually a hotel. His lifestyle was traveling and he never mentioned the possibility of owning a home alone. It makes no financial sense, even if you are looking at buying a condominium. There are rules and fees and all kinds of problems that you don’t need to deal with when you are only there a few weeks out of the year.
10. Your personal life is up in the air
Stability is an essential part of buying a home, but just not financial. Married people get divorced every day, and people involved in long term relationships find themselves unexpectedly alone in one month. When you are talking about two or more people living together under the same roof and sharing the expenses of living in a home, instability of your personal life has a good chance of affecting the ownership of the home.
The more of these 10 points that apply to you, the less you need to think about buying a home.