Today’s post 5 Reasons Buying a Home Can Wait is a guest post by Charles Muotoh a real estate agent covering the Washington DC area. Wanting to buy a home is on the top of many’s priority. But, don’t be so anxious that the American Dream turns into a nightmare.
Charles gives some great insight into why you might want to hold off on owning a home.
Buying a Home Can Wait
Owning a home may still be the American dream, but if you are not financially ready, it can quickly devolve into a nightmare. Buying a home is a serious matter, and not something to rush into just because you think the time is right.
Before you choose a real estate agent and start visiting open houses, you need to look carefully at your current situation. You need to assess your financial stability, your income, your credit and a number of other factors to make sure buying a home is really the right choice. While owning your own home can be a great way to build wealth, there are solid reasons to put off this important purchase. Here are five reasons why you might want to wait.
Great Reasons Why Buying a Home Can Wait
#1. Your Income is Too Low
Trying to buy a home with a low income will likely be an exercise in frustration, so you might want to wait until you have started your career and enhanced your earning power. If your income is too low, you will probably have trouble securing the financing you need. Even if you manage to secure a mortgage, your income could make the mortgage payments difficult.
Experts recommend that your total housing expenses, including the mortgage payment, real estate taxes and other associated costs, take up no more than a third of your income. Think about that before you call the real estate agent.
#2. You Plan to Move in a Year or Two
Buying a home can be a great long-term investment, but long-term is the key phrase here. No one knows what the market holds in the short term, and you need only look back to the 2008 housing crisis for proof that home prices can go down as well as up.
If your future plans are still up in the air and you think you might be moving out of the area soon, it is best to stay put and remain a renter. You can use the intervening months and years to build up your savings, save for a down payment and learn about the real estate market.
#3. Your Credit Record is Spotty or Nonexistent
Mortgage lenders learned their lesson from the recent housing crisis – maybe a little too well. Credit standards have tightened significantly since the heady days of the housing bubble, and lenders will want to make sure you are a good risk before handing over that big check.
If your credit history is spotty due to past missteps, you should focus on rebuilding your credit and raising your credit score before shopping for a home. If you have no credit history at all, establishing a track record of on-time payments will help you enormously when you shop for that first mortgage.
Your credit history will determine the type of loan and interest rate you can get, so it is imperative that you take the time to establish good credit before you decide to purchase a home.
#4. You Have No Savings
Buying a home when you have no savings is always a risky thing to do. The slightest misstep or unforeseen expense could leave you in the lurch, and leave you unable to make the monthly mortgage payment.
Financial experts recommend that you have a minimum of six to twelve months worth of living expenses in savings, and having that much should be a prerequisite to buying a home. If your savings are looking a little slender, you might want to boost that bank account before you look for a home.
#5. You Are Drowning in Debt
High levels of debt can sink your dreams of home ownership in several ways. For one thing, having a lot of debt raises your credit utilization, something lenders look at carefully when making mortgage loans. If you have a lot of debt outstanding, that will be a negative factor, and it could cause you to be turned down for the home loan you are seeking.
Even if you manage to somehow get a mortgage, that preexisting debt will make the payments harder to afford. If you are paying hundreds of dollars a month toward your credit card debt, you may not have much left over for your monthly mortgage expense. If you are drowning in debt, paying down that debt should be your number one priority. There will be plenty of time to look for a home once those other bills are paid.
The roof over your head is probably the most expensive single purchase you will ever make, and you want to make sure you are properly prepared for that commitment. If any of the five situations listed above apply to you, it is best to put off your dreams of home ownership until you are in a more stable financial position.
Other Real Estate Resources:
- CNN Money 3 Reasons Not To Buy a Home This Year
- Kevin Vitali Qualifying for a Mortgage
- Kyle Hiscock 12 Tips to Improve Your Credit
- Bill Gassett Increase Your Credit Worthiness
- Conor MacEvilly 5 Types of People Who Shouldn’t Buy a Home
About the Author:
Charles Muotoh provided, 5 Reasons Buying a Home Can Wait. Charles is the owner of dcrealestateguru.com, a full service real estate firm focused on leveraging digital marketing strategies to serve buyers and sellers of real estate in the Washington DC area.