Purchasing a home is a big deal. It also is a “turning point” for people. But you have to really ask yourself if you should buy a home. Many people think to themselves, “I’m at a spot in my life where I can afford it.” It’s not just about being financially able to purchase it. A lot more goes into it. Your age is also a factor. If you’re 25, you may think you want to stay in your city permanently, but you haven’t even gotten married yet, and you might meet someone who lives across the country. You never know. Here are some questions you should ask yourself when deciding:
How long do you expect to be there?
The longer you plan to stay, the better off you are buying. That’s because buying and selling cost money, and require a significant amount of time and effort. If you plan to stay less than five years, you might want to rent instead.
Would you be content if circumstances meant you had to stay longer?
You might plan for your “starter home” to only last for five years, but you have no idea what can happen in five years. If situations came up, would you be O.K. staying longer? This is a serious question to consider. Read: What to Know About Renting Versus Buying a Home: What Millennials Should Know.
What’s your career look like?
If you’re in a declining industry and your job is not secure, you may not want to lock yourself into a mortgage or a city. If you’re involved in a romance with an out-of-town love, or considering relocation for other reasons, you may want to rent. Buying a house and selling it a year later to relocate is likely to cost you some money.
What are the monthly utilities and cost of maintenance?
Do some realistic math. Make sure you consider all the monthly costs of owning, including property taxes, insurance, homeowner or condo fees, lawn maintenance and other regular costs. Utility costs also may be higher if you buy, since many rents include water service and garage collection. See: Should You Buy a House or Rent? The Economics of Home Ownership – Forbes.
Do you have 20% for a down payment?
It’s possible to buy a house with a smaller down payment with an FHA (Federal Housing Administration) mortgage. But in a competitive market, you may find sellers choosing offers with higher down payments and fewer contingencies. Plus, a higher down payment means a lower mortgage payment and no private mortgage insurance.
Do you have the money to pay for repairs?
All homes, even new homes, sometimes need repairs. Water heaters break, pipes leak and termites periodically drop by to wreak havoc on your home. Condo dwellers aren’t immune because they can face sometimes hefty assessments to pay for repairs to the entire building.
Would you be better off financially if you spent the money elsewhere?
If you spend your savings on a down payment for a home, that money is no longer earning money for you. Depending on how it’s invested, you might be better off financially renting and using your discretionary cash for investments. Consider the alternatives and do some math to determine which route is best for you. For further reading, see: Is it Better to Rent or Buy? – NY Times,