9 Reasons Why You Should Not Buy A House
I am obsessed with real estate. I watch HGTV religiously, I always stop for a tour if I see any open house sign, I spend all day on Pinterest looking at houses, landscaping, home decor, etc. All I want is my very own place. But I don’t own a home. I know the American Dream is owning your own place with that white picket fence, but the reality today is that it’s just not a good idea for many people. And I get the agony, like I said, my own home is alllllll I want. But, right now in my life, I know it’s just not a good idea to own a home. Here are reasons why buying a home might not be a good idea for you:
Note: I understand that everyone is in a unique position, and sometimes you don’t have a choice, like even having the option to rent a home instead of buy or the option of living with someone else until you have enough saved. I simply wanted to address some of the reasons why many people choose not to buy a home and discuss some of the consequences. Even if you have no other options, it’s always better to be prepared for the repercussions.
1. You Qualified For a Mortgage
I am going to just stop you right here if the main reason you’re wanting to buy a house is because you qualified to buy a house. Just because you qualify does not mean that you can actually afford it or even that it’s a good idea. Banks aren’t qualifying you because they ran your numbers and think that you can reasonably afford to make the appropriate, on-time mortgage payments for that $200,000 home. They want you to fail, not succeed (depressing way to think about it, but it’s important to remember that that’s how businesses like that make their money: off people who spend more than they can afford to pay).
Remember, just like credit card companies, banks want to make their money by trapping people into large payments they can’t actually afford to pay in the long run. So of course they want to lend you money, and they’re just hoping you’ll get excited by being qualified to buy a home and buy one you can’t actually afford to maintain. You have to look out for yourself, remember not everything that glitters is gold.
2. You’re Not Thinking About The Total Cost
It’s important to remember the differences between renting and buying a home. Often times, when you’re renting, you’re making one monthly payment to your landlord and then maybe paying your utilities (sometimes those are even included in the rent) and that’s it. It can be tempting to think of mortgage payments like rent and think “oh I pay $800 in my rent every month, so I can totally afford a home where I’m paying $800 in my monthly mortgage.” But often times, your rent includes many things that are not necessarily included in that mortgage payment, like landscaping, insurance, homeowners associations, maybe your utilities, any repairs or home improvement projects you do (and remember that not all improvements are deductible; deductible expenses are usually limited to casualty loss deductions), etc.
I know for me, when I rented, if the ceiling was leaking or the dishwasher broke, I called my landlords and they fixed it (eventually….). It didn’t cost me anything, my rent was still the same, even though they’d spend hundreds on repairs that month. (Of course, this is not true for everyone, maybe you did pay for repairs when you rented, but you get my point.)
If you owned your home, you’d still be paying the same amount in your mortgage, but that would be in addition to the hundreds you’d spent. And this is not even including the cost of your time, if you’re doing your own landscaping or repairs, or whatever, yourself, what do you think your time is worth?
I know renting can be so painful sometimes, especially for those that are already frugal. It can feel like you’re throwing money away, and why would you want to do that when you could just buy your very own home?? But, if you’re not sure about your location yet or if you move frequently, renting can often be a better option. I read an article once where the author described renting as a “freedom tax”, that is, with renting you can think of the money you’re paying in rent as the price you pay for the freedom to be mobile. It can be a great way to experiment with what areas you like and don’t like and learn where you might want to eventually buy a home. It’s like doing real estate recon, but for yourself.
4. You Can’t Afford The Down Payment
If you can’t afford the down payment on a home, you’re not ready for that home. And I mean if YOU can’t afford the down payment. If someone is giving you money for the down payment, you’re not ready. If you can’t even afford the initial cost of the home, what are you going to do when something goes wrong with your house? How will you afford it? You’ll just find yourself deeper in debt.
Also, the best interest rates are usually offered when you put 20% or more down on the home, so you’ll save the most money in the long run if you work on saving up a good amount for a down payment first before purchasing a home.
5. You Have Bad Credit And/Or Debt
You are just going to get terrible interest rates with bad credit. Terrible!! It is better to work hard on saving money and repairing your credit before buying a home, so that you can secure the best interest rates. (Just look at the cost of taking out loans with bad credit here.)The amount of money you will save in the long run can end up being hundreds of thousands dollars.
Similarly, if you have debt (or even worse: bad credit and debt!), I would not be even thinking about buying a home if I were in your situation. You should already be working very hard to reduce your debt load, and adding to your debt just seems way too overwhelming. I would be trying to cut my debt down as much as possible before looking into buying a home.
6. The Real Estate Market Is Declining And/Or It’s Cheaper To Rent
Do your research! Many individuals can’t wait to buy a home, but then they do so at the very worst time to buy because of their eagerness, and watch as their houses’ equities drop lower than what they paid for it. Because they bought when the real estate market was in a decline. Of course, if they’re in it for the long-term, and they did their research and feel confident that their house’s value will increase once the market picks back up and they can eventually break even or better when they’re ready to sell, then this isn’t really a reason not to buy as much as the others. But I wanted to mention it because it’s something you should be aware of.
Included in the considerations you should make regarding the real estate market, is the price of renting vs buying. As they say, it can be a “renters’ market”. Sometimes, it can be even 50% cheaper to rent than to buy and be making mortgage payments. So it’s not always a guarantee that buying is the most frugal housing decision.
7. Peer Pressure
You want to buy a home because all your friends bought a home! Bad idea (unless you’re actually ready for it!). This goes without saying, but don’t do something just because everyone is doing it. You don’t know their financial situation. (Maybe they bought a home but they’re not as smart as you and didn’t read this article about the many reasons not to buy a home, and now they’re way in over their heads!) Never compare yourself to others, just do what you know is best for you.
8. Everyone’s Not On The Same Page/Low Job Security
If you can’t afford a home by yourself, but can with another person(s), you had better be 100% sure that they’re not going anywhere, and that they’re going to be paying what they say they will, and that the finances really do add up to make it a good decision for all parties involved. Many people buy a home as a couple, and then break up and find themselves with a payment that’s way too much for them to afford alone.
Or maybe you’re sure you’ll always be together, and he’s employed and says he’ll pay half the monthly costs, but his job retainment history is not good. If he’s been fired from 6 jobs since you’ve known him, I wouldn’t bet on him making his portion of the payments on time. (Likewise, if you want to buy a home, but you’re the one with the flaky job history, you’d better be sure your partner(s) can afford that home without you.)
To conclude, if you’re buying a home with someone(s) and aren’t sure of your or their future, I would be totally sure that you can afford that home all by yourself, worst case scenario. Because the worst case scenario can always happen.
“One of the weakest performers [is] your own personal real estate, because it doesn’t provide much income,” [Tony] Robbins says. “It’s an inflation hedge. You do a little better than inflation, and you can have your own home, so there’s a psychological, emotional benefit.” Robbins suggests that millennials need to think bigger than buying a home for just themselves, and instead find a way to generate some additional cash flow from their real estate investments.
Alright, those are all the points I wanted to address. I hope you have a good idea now of reasons why you should not be buying a home. I know the allure of your very own home can be so appealing, but it’s always a good idea to analyze your unique financial situation and be aware of your limitations.
Are you thinking of buying your own home? What is your biggest concern with doing so?