Are all your friends buying houses and that makes you feel like you should get in on the real estate market? Do all the reports of housing shortages freak you out and you think you should buy instead of rent? While buying a home has its advantages, here are some reasons you should continue to rent instead of buying a house.
Think about it. You have trouble covering your expenses as it is and now you want to sink your money into a house??? Stop!
2. You Don’t Have an Emergency Fund
Unexpected things happen in life and that’s what an emergency fund is for. When you have a house, the chances of unexpected things happening can double. A pipe bursts, the A/C breaks, and the fridge stops working.
When you rent, those are things a landlord will take care of for you. As a homeowner, those expenses are all on you.
If you don’t have an emergency fund, the repairs will have to come out of your savings or you will have to borrow money or charge them on your credit card. This could create an ugly cycle of debt.
3. You Are Borrowing Money for the Down Payment
If you’re borrowing money just so you can qualify for the mortgage loan, you might want to think twice. I understand there are extenuating circumstances. If you come across a house that’s waaaaaay under market value, it might make sense to do what you can to obtain the property.
However, if the property is at market value and you don’t have one penny saved up for the down payment, it might make more sense to wait. Any money you borrow will have to be paid back.
4. You’re Thinking of Moving From Where You Live
A house is a pretty serious commitment. If you need to leave town permanently for whatever reason, you can’t take the house with you. Well, unless you live in a tiny house. Say you want a house but you hate the city you’re living in, it doesn’t make sense to buy a house right at this moment.
If you’re not digging your job and want to quit or find a new job, definitely don’t buy a house. You’re facing so many unknowns. Say you buy a house and 6 months later you find a job that requires you to move 800 miles away.
Do you turn down the job because you just bought a house? Do you scramble and try to find a renter?
With a rental, you can pack up and leave if you need to. Sure, you might have to break the lease but that’s still cheaper than a 6-figure mortgage.
5. There is a Better Use for the Down Payment
Let’s say you have $20,000 saved up for a down payment towards a house. That’s awesome, congrats. Before you give all that money to the bank, ask yourself, is there a better use for that money?
Do you have student loans or a car loan? I don’t think that you should put your life on hold until you’re absolutely debt free. However, carefully evaluate if the additional loan is going to throw your budget out of whack.
There also might be opportunities that present better value for your money. Perhaps you’re given a chance to invest in a business. Maybe you’re thinking about furthering your education to advance your career.
Regardless of your options, just keep in mind that once your chunk of money goes towards a down payment, it’s gone. You will not be able to use that money towards something else.
6. How Much of Your Paycheck Will Be Spent on the Mortgage
Buying a house is exciting but sometimes all that excitement can cloud one’s judgment. Conventional wisdom says your housing costs should comprise no more than 28% of your gross monthly income. Here’s a handy calculator for determining how much house you can afford.
Everyone’s situation is different so the 28% calculation is a rough estimate. However, if you’re projected to spend more than 50% of your take home pay on your expenses, you might be in trouble.
7. You Think of a House as an Investment
An investment is something that’s purchased with the hope that it will generate income or appreciate in the future (see Investopedia). A good investment is one that actually makes you money. A house may be an investment but it’s not necessarily a good one.
As the housing crisis showed us, a home purchased for $300,000 in 2006 may be only worth $180,000 in 2009. If you buy when the housing market is hot, thinking that you’re gonna be a real estate gazillionaire, you’re in for a rude awakening if the market crashes.
It’s okay to want to make money but if your biggest reason for buying a house is hoping that it’ll make you money, think twice. A house can appreciate in value but it may take a decade or two. Are you willing to wait that long? Also, you have to sell the house to capture the profit. Are you okay with moving out?
8. You Can’t Afford the Loan Without a Co-Signor
There are multiple considerations here. It’s not unusually to have two people on a loan. Couples, siblings, or parents and their children can end up on a loan together. It’s one thing to buy a house together with the intent that both of you will occupy the house.
If you’re buying a house with another person solely to get that person to fund your purchase, things are going to get tricky. A co-borrower has an interest in the purchased property just as you would. If your relationship with this person turns sour, things are gonna get ugly.
One might argue that this is no different from a marriage where a couple gets a divorce and has to sell the house. But, most marriages are based on something other than borrowed money.
9. You Feel Like It’s Time to be an Adult
This might be the worst reason ever to want to buy a house. You’re in your 30s, all your friends have houses and you want to be just like them. Or perhaps people keep telling you that renting is just throwing money away and that you should really buy a house.
Block out all that noise! You need to do what’s best for you, your lifestyle, and what you want out of life. Focus on YOU!!! Buying a house is too important of a decision to make on a whim.
You should have an honest conversation with yourself and decide why you want a house.
Do you own a house or are you renting? Do you have any regrets if you bought a house? Share your budgeting tips and experiences!