Most of us reach a point in our lives when we think we are ready to buy our own home. If you’ve been thinking that yourself lately … pause for a minute and examine your reasons carefully. After all, home ownership is possibly the largest single investment of your lifetime and such a momentous decision deserves careful consideration. I am going to help you think this through by asking a few questions that will stimulate some introspection.
Consider these Questions
- Do you have children? If the answer is yes, do you have all the children you plan to have or are you considering adding to your family?
- Is your job stable?
- If you are married or living with your significant other, is his or her job stable?
- Do you think you may be required to move at some point in the future to meet the demands of your employer or for other reasons?
- Are you “handy” or would you need to hire outside help for routine repairs to your home. (ed. note: See my DIY Deck!)
- Do you regard the purchase of a home as an investment?
- What do you think is the principal advantage of home ownership?
- Have you considered the additional costs of home ownership beyond the mortgage payment?
- Have you been living independently for at least five years?
Asked and Answered
If you’ve already asked and answered these questions in the course of contemplating home ownership, then you are probably ready to make the jump. If you haven’t, then I suggest you spend some serious time in contemplation. Home ownership is not for the careless!
That said, let’s look at why these questions are important. If you are buying a home, you are paying for appraisals, inspections, and a host of other fees. Given an economic climate where growth in value is not assured, it is prudent to buy with future needs in mind. How many bedrooms and bathrooms do you need? Do you need a yard? Does it need to be a large yard? Knowing these things in advance will allow you to buy as much home as you require and no more.
How’s Your Job?
Having stable employment will make it easier for you to secure a mortgage and ease the stress of home ownership overall. If you are relying on the income of your spouse or significant other, you must be reasonably certain of the reliability of that income stream. As a practical matter, I would not recommend buying a home whose mortgage payment cannot be met on one income. I realize this is a conservative position, but it is the most prudent approach.
If you or your significant other has a job that is likely to require relocation in less than five years, you may want to consider remaining a renter. Homes aren’t appreciating at the same rate they were 10 years ago. You could find yourself in the unfortunate position of being forced to sell your home at break-even price or possibly at a loss.
Even if you buy a new home, repairs are inevitable. You must be prepared to pay out of pocket for repairs if you are not capable of accomplishing them yourself. Your lender is not going to be sympathetic if you miss a payment because you had to replace your water heater. Tuck some money away.
Don’t forget that once you’ve bought your dream home you’ll likely need a lawnmower, furniture, tools, appliances, curtains, etc. I wouldn’t recommend borrowing to acquire these necessities since you’ve already got a mortgage payment to pay.
Investing in Real Estate?
As an investment, homes represent a better bargain than stocks right now. Prices for existing homes are at their lowest since 2003. On the flip side, this means that previous owners lost 9 years of equity gains and that could happen again! I am not trying to discourage you from a decision in favor of buying. I just want to make you aware that there are downside risks. Do I think it is likely that home prices will continue to fall? Not really, and if they do, it will not be a significant drop.
The advantages of home ownership are many and varied. I just think it is important for you to have a clear vision of your reasons for buying a home. Buyer’s remorse can cost you more than just your money.
If you’ve answered yes to the question of living independently for at least 5 years, you have likely developed the level of self-discipline and life experience necessary to see you through the adventure of home ownership.
What did you stop to consider before buying a home? Was there anything you wanted to achieve or to have before you started looking for a house?