Right now, people are feeling like there is a lot of pressure to buy a home. After all, mortgage rates have been insanely low. So, for many who have been saving up to buy their first home, now feels like a good time.
But, while the nationwide real estate market is booming, you probably aren’t looking for an average home just anywhere.
And local markets can see vastly different stories playing out that you don’t hear about when you’re taking a look at the real estate market as a whole.
So, how can you look at specific data that applies to your specific situation and still make an informed decision?
While there are benefits to buying, let's look at some top reasons not to buy a house.
First, the original article where this material came from stated that you shouldn't buy if you're nearing retirement. I couldn't disagree more. If the other criteria, such as income, debt, etc., are in line, buying can be a good choice, as it tends to lock in your housing costs. This has been my experience.
YOU CAN'T AFFORD IT
It's important to be honest with yourself about whether you can truly afford a home, says Christopher Flis, president of Tennessee-based Resilient Asset Management
. "By afford it, I mean you do not borrow from your retirement accounts for the down payment, the occupancy costs of the home do not exceed 25 percent of your gross income, and you do not plan to do a revolving door of upgrades to the home," he says.
YOU WANT FLEXIBILITY
Unless you're buying a house on wheels, you're stuck in one place. "If you're in the military or have a job that transfers you every couple years, buying a home can become more of a burden than a blessing," says Christian Stewart, a financial coach with Do Better Financial
. "Trying to sell a home quickly typically means you take a loss or become a long-distance landlord, neither of which is ideal." When you can commit to a location for three to five years, buying a home makes more sense.
YOU CAN'T AFFORD A HOME IN A GOOD SCHOOL DISTRICT
The local school system should always be factored into a home purchase, and areas with great public schools are usually more expensive. If you can only afford a home located in a less-than-adequate school system, you may decide to move later if your family expands. Unfortunately, that may not be so easy -- a bad school district can tamp down interest from prospective buyers along with the future sale price of the home.
YOU'RE NEW TO YOUR JOB
Buying a house when you've just started a new job can have downsides. If the job doesn't work out, you may suddenly find yourself struggling to make the mortgage payment. If you simply don't like the work, you may be stuck in a job where you're unhappy just to stay afloat.
YOU HAVE BAD CREDIT
There are certainly banking institutions that will work with buyers who have less than ideal credit, but they offer so-called subprime mortgages, which come at a cost. "Subprime mortgages tend to have higher or adjustable interest rates, which translates to paying more for your home in the long run," says financial coach Christian Stewart. If you have debts in collections or judgments against you, get those cleaned up before a home purchase, as that will help you qualify for better terms.
YOU HAVE A HIGH DEBT-TO-INCOME RATIO
Add up all your monthly debt payments (credit cards, loans, etc.), divide that figure by your (gross) monthly income, and multiply the result by 100. The number you come up with is what's known as your debt-to-income ratio, which is a huge factor in any mortgage application. "Even if your credit score is pretty good, over 670, having a high debt-to-income ratio (over 40 percent) will land you right back in the subprime category," Stewart says.
YOU LACK A LONG AMORTIZATION PERIOD
Amortization, or spreading mortgage payments over a number of years, is important to consider before buying. "With amortization, you don't really start tackling the principle within your mortgage until about seven years," says Shawn Breyer of Breyer Home Buyers
. At the same time, wage and salary workers typically stay with an employer for a little over four years, according to the Bureau of Labor Statistics. That means those who move for their next job don't build equity; they lose money by owning.
YOU'RE NOT GOOD AT UPKEEP
Cutting the grass, keeping the gutters clean, wrapping the pipes when the temperature drops to freezing — all these things are your responsibility as a homeowner. If you're already a busy person, or someone who doesn't enjoy house projects
, then home ownership may not be the way to go although there are options with slightly less responsibility, such as a condominium. If you're in a financial position to do so, you can hire people to do this for you.
YOUR RELATIONSHIP IS ROCKY
Divorce or separation may not be a comfortable prospect to consider, but when contemplating a home purchase with a partner, they're important to keep in mind. "If your relationship is already rocky, buying a home will not fix it," says financial coach Christian Stewart. "If you split, the emotional stress will be compounded by the financial and legal complications required to split your assets."
YOU CAN'T AFFORD HOA FEES
Many home buyers fail to consider the monthly cost of condo or homeowners association fees (and restrictions
). Depending on the location and features of the community, the dues can be in the hundreds of dollars. The money is used to maintain things like the landscaping and amenities such as a swimming pool or tennis courts. "If you can't afford to pay the monthly mortgage payment and the condo fees ... it would be better to rent," says real estate agent Allison Bethell
Personally, I'd never buy into an HOA until I fully vetted the organization, its people and their rules. On my last house, I avoided and HOA.
YOU HAVE NO EMERGENCY FUND
If you don't have an emergency fund in place before buying a home, handling surprises becomes much more difficult. "An emergency fund is in place for a rainy day, and when you own a house, it's going to rain — literally and figuratively," says financial coach Kalen Omo. "When the roof leaks or the plumbing breaks, you need a fund that you can go to in order to take care of those things."
YOU ALREADY LIVE PAYCHECK TO PAYCHECK
For those who are already in a tight spot financially (think: juggling bills or regularly overdrawing a bank account), buying a home will almost certainly make things worse. "If you want your home purchase to be a dream instead of a nightmare, get full control of your spending before you start shopping," says financial coach Christian Stewart. The first step: Create a budget
and stick to it.
YOU JUST DON'T WANT TO OWN A HOME
Don't make a major life decision like buying a home due to societal or family pressure. "While it may be tempting to buy a house just to silence the masses, the financial and time commitments required for home ownership are too high to make this decision lightly," Stewart says. "Unless your family or friends are ready to write checks to help you with the mortgage and maintenance, don't buy a house unless you truly want one."