Buying a home is most individual's dream. Mostly every person wants to own a home and people even save for a very long time just to be able to buy a home. Aside from being a dwelling place, a house can also be used to increase cash flow by renting it out.
Even though many Americans plan to buy a house, it certainly is not for everyone. How do you know if you're ready to buy a house. What are the signs that you are are not yet ready to buy a home?
1. Looking for new-found happiness
If you think purchasing a house is the key to finding happiness, you will be sorely disappointed. You have more freedom to customize your surroundings, and a yard can be the setting for enjoyable events, but a house can also be a source of frustration. Spending time on maintenance issues and yard work can be taxing, while homeowner associations can restrict how much freedom you truly have on the home’s exterior. Before you know it, you may be regretting your purchase decision.
2. Not calculating the numbers
Buying a home is likely the biggest financial transaction of your life. Failing to take time to figure out how much house you can afford is an obvious sign you’re not ready to buy one. A general rule of thumb is not to spend more than 30% of your gross income on a mortgage payment, which includes principal, interest, property taxes, and insurance. Lenders typically allow up to around 36%, but how much a lender is willing to loan you and how much you can comfortably afford are two different things. After all, property taxes and insurance costs rise overtime. If your down payment is less than 20%, mortgage insurance will drain your bank account even more.
3. Can’t seem to settle down
Buying and selling a home is expensive. If you can’t seem to settle down into a job or particular location, renting is likely a better option. You could find your finances upside down if you have to move shortly after buying a home. Realtors charge commissions and administration fees, lenders collect loan origination fees, home appraisers and inspectors cost in the neighborhood of $400 each, and the mere process of completing all the required paperwork is time consuming. Renting is not a matter of throwing your money away, you’re paying for a place to live without these common burdens of home ownership.
General advice recommends not buying a house unless you can picture yourself living there for at least five to 10 years. This allows time to build equity by paying down your mortgage and allowing home prices to rise. However, as the recent housing bubble proved, rising home prices are not a guarantee.
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