Let me start by saying the cheesiest thing- the choice comes down to what do you need and what can you afford?
My husband and I get asked a lot if we have bought a house and the answer- which also applies to many frequented questions is NO. Although we have been married five years and we have been officially out of school for a while, we have not yet bought a home. Several factors influence our decision-making process. Hopefully, this post will help you if you are debating similar issues.
One of the things people say a lot is that renting is wasting money. It is not – you get a place to live in. You can waste money in either situation; if you rent or buy a home that is way beyond your means or bigger than you need (McMansion ALERT). Having a place to stay that is within your budget and financial goals is not wasting money-it is a blessing.
Some questions to ponder before you make a decision
- How much can I afford to pay for my living situation? If you can only afford to spend $500 a month for the roof over your head, then you may not be ready to purchase a home.
- Do I have consumer and or student debt? If you have a lot of debt, you may not want to buy a house and add a mortgage to your debt bill –
- Do I have a solid emergency fund? The experts suggest 4-6 month’s worth of living expenses saved in an easy to access high yield savings account before making major investments. Fellow millennials and baby cousins in Generation Z- please trust me when I say emergencies happen. You need an emergency FUND.
- If I were to buy a home, could I afford a decent down payment to avoid paying PMI and other protections? You can probably take advantage of many first-time buyer deals and put just 5% down, but some financial experts say it is always better to have at least 10-20% down payment saved. If you don’t use it all for the downpayment you may need it for closing costs and moving expenses.
- Do I have money set aside for home ownership related expenses that can occur as soon as I move in? These can include flooding basement, failing AC or heating system, leaking roof, etc. Things happen. Unless you are getting a brand new home chances are that it will have some issues.
- Could I comfortably pay my mortgage if I lost my job? This is important.
- Do I plan to live in this home for at least five years? If you are still moving jobs buying a home may be risky – if you are unable to find a renter, you may find yourself paying a mortgage for an empty house. If you find a terrible renter, you may still pay your mortgage plus rent at your new place.
- The cost of buying a home is more than the cost of a mortgage and down payment. You will need to pay taxes, homeowners insurance, fix things, mow your lawn, keep up with neighbors and their gardens – heating a home is also kinda expensive.
- Owning a home is also fantastic – you can paint the house fun colors, and you do not need permission to drill the walls.
- A home purchase can be a worthwhile long-term investment, especially if it is in an area where home values appreciate.
At the end of the day, do not feel pressured to rent or own a house. Your bank account will tell you what you can afford. The heart might lead you astray.
P.S. I am not a certified financial advisor this is just my fun blog