Buying a house is such an exciting time! Renters long for the day that they are at a place in life financially where they can afford to purchase a home. However, you should also realize that just because you have the cash to shell out for a home doesn’t always mean that you should take the plunge quite yet. People’s lives are ever changing, especially so when you are young. See: When You’re Better Off Renting a Home Than Buying One. If you are under 30, you really should think twice about buying. Maybe you can afford to buy a home, but can you afford to set yourself back in your relationships and career just because you bought a house?
Realize that you are setting down roots when you purchase. This means that you are not going to be able to move if you get a job that you love, in a different state. What if you meet someone right after you buy the house, and want to sell it to be closer to that person? See: Is it Better to Buy or Rent a Home? As a general rule of thumb, you should never, ever purchase a home if you can’t live in it for at least five years. Of course, you may even have to stay longer. But five years is the amount of time that experts say you have to own the new house in order to not lose what you spent purchasing it.
A house is something you buy when you are settled in your career, and in the stage of life you want to be. It doesn’t make sense to buy when you don’t know exactly what your life is going to look like in the future. Of course, plans are constantly changing, even if you are in your 40s or 50s. But, when you are in your twenties or early 30s, you are still making life choices that will affect the location you live in. Read: Owning vs. Renting.
Can you afford the maintenance? You’ve got to crunch some numbers. Many people look at the cost of a mortgage and think they can afford it, because it’s pretty much what they pay in rent, but they won’t be throwing money out of the window. True…except you’ve got to pay taxes, insurance, maintenance costs, repair costs, and many other expenses tacked on. Most people don’t think about all of these things when they think about buying a house.
Do you have enough cash for the down payment? 20% is the general rule of thumb. If you put down less, you can expect to pay higher rates, and you’ll also have PMI tacked on to your monthly payment, which is insurance paid to the bank in case you default on your loan. Read more: Should You Rent or Buy? 7 Questions to Help You Decide.