Hey everyone! Happy Monday. I want to say thank you to everyone who left a comment on my post the other day about what percentage housing expenses are relative to your income.
I received a lot of great responses and hopefully it will help people determine if a house is right for them or not. So many people don't realize that there is more to a house payment besides just the actual payment (mortgage, insurance, taxes, maintenance, etc.).
It seems like a hot topic in the personal finance community is whether a person should rent or buy a home. What if you're not sure if a house is even right for you? Maybe an apartment would be better? There are many factors to think about before you buy a home.
When we were in the process of buying our first home, there were a lot of things to factor in. Yes, we were really young when we bought our house, we were 20 years old. Now, I don't know if I would recommend buying this young for others. It has worked out for us, but we had to overcome many hurdles in order to get where we are.
We lived together for a couple of years before we decided to buy. We knew apartments weren't for us (we have a big dog that we could never get rid of because she is my baby, and I lived in apartments nearly my whole life due to us constantly moving for my dad's job).
My dad also preferred apartments/condos over a house with a yard because there were amenities (such as swimming pools and tennis courts) and he didn't have to upkeep anything besides what was actually in the apartment. He enjoyed how carefree it was.
Also, W and I had rented a house together, and we knew what it was like to live in a house together. I knew for a fact that I did not want to live in an apartment or a condo. There is nothing wrong with condo living, different people enjoy different things.
Before we bought, I was tired of having no yard my whole life and something that wasn't “mine.” I have moved a ton (when I was younger I went to a grand total of about 12 different schools), and I just wanted to stay put.
We knew we wanted a house, and the fact that houses were only slightly more expensive in our area definitely appealed to us.
However, we never really thought about how we would feel stuck if we bought a house. We were definitely thinking in the moment when we bought our house. We love our house of course, but I constantly wonder if I would be parading around the world if I didn't have a house and so much STUFF.
Dreams of traveling extensively while we are young have definitely vanished due to us having to pay my mortgage. Oh well, that's just the responsibility of growing up! I do love being a homeowner though.
Below are some questions to ask yourself before you buy:
Do you have a reliable income?
Buying a house means that you will have a constant bill to pay (your mortgage payment of course). So a reliable job and income is definitely needed. If you are freelancing, you will want to make sure that you will have enough to pay your mortgage along with any surprise expenses that may pop up.
Of course, the same could be said about having an apartment as well. An income is needed wherever you decide to live.
How long do you plan on living there?
If you plan on having kids and still staying the same house, then you definitely want to keep that in mind. However, if it's just going to be 2 people in the house for a while, then do you really need a 3,500 square foot house?
Also, the general rule is that if you think that you will be living in the house for less than 5 years, that you should just rent instead. The costs of selling before 5 years usually outweigh renting. You will have many costs to pay if you sell, such as closing costs, realtor expenses, repairs, etc.
Do you plan on/want to travel?
This is one reason why we regret buying a house (but we still do love having it). Being able to travel for a long period of time is not possible, because we do have to think about how we are going to pay our mortgage payment every month and I'm a paranoid person so I would be afraid of squatters ruining the house if we cannot find a reliable house-sitter.
However, I do plan on making the switch to self-employment soon and traveling at the same time, and we will be keeping the house. We will just have to make it work!
Do you plan on moving a lot?
If you have a job/career that will require you to move a lot, then home ownership may not be for you. If you are moving every year, then home ownership will be way too expensive to justify the costs of hiring moving companies and things like packaging.
Is your credit good or great?
Yes, I realize that a lot of people view mortgages as the devil, but for most, owning a house without starting with a mortgage is near impossible. A better credit score (read my post on building credit) leads to a better interest rate, and therefore of course, a lower mortgage payment.
Also, a low credit score will lead you to not even being approved. Get approved before you start looking so that you're not let down. No one wants to fall in love with a house only to find out that they can't get approved for it.
Do you have enough for a down payment?
We didn't put down as much as we would've liked, and therefore, we have to pay PMI. For our next house I plan on putting a substantial amount down or paying in cash. PMI is so much money every month and I would rather not pay it. Getting home loans without PMI is always great!
What other tips do you have for someone thinking about buying a house?
Do you prefer to buy or rent?