Buying a Home Is a Major Milestone and Life Goal for Many People. The Common Sentiment Is That Rent Is Throwing Money Down The Drain, While Buying a Home Is an Investment That Builds Equity - but The Truth Is More Complex.
Personal finances, lifestyle, goals, location, and the economy all play a role in whether or not it’s a good idea for you to buy a home right now. You control some of these, such as your desire to stay in one place for an extended period or not. But others, like interest rates and home prices, are outside of your control. If you’re on the fence about buying a house, take a close look at each of the following factors before making a decision.
Stability Vs Flexibility
The choice to take on homeownership has as much to do with lifestyle as it does with your finances. In fact, even if you can afford to buy a home, you should only do so if you’re ready for a major commitment. Why’s that? Because you purchase a home, you’ll need to stay in it for at least three to five years to build equity.
Why is equity important for homeowners? Because it represents the amount you’ll get back when you make a home sale. Equity is the difference between the value of the home and the amount you still owe on your mortgage, and waiting three to five years before moving gives you the chance to pay down your mortgage while the value of your home appreciates. The bigger the difference, the more money you’ll make on the sale.
What does this mean for your lifestyle? If you buy, you shouldn’t plan on changing locations for a few years after making a home purchase, because you’ll need to stay in the same house. This makes homeownership a great choice for someone looking to put down roots, but less great if you like to move every time your lease comes up.
Also, you should only buy a home if you have a stable career, and you plan on staying in it for a while. You’ll usually need to show two years of employment in the same position to get approved for a home loan, and to make sure you stay current on your mortgage payments, it’s a good idea to not make any major career changes during the first couple years of homeownership.
The Housing Market
If you’ve decided to buy a house, the next thing you need to determine is if you should buy a house right now. If your finances are in order and you know that buying a home is for you, consider the real estate market where you live and compare it to the rental market.
In the country overall, rental prices and home purchase prices have gone up in the last several years—but now, home purchase prices are starting to come down. That means it could be a good time for you to buy.
Not sure? Get in touch.
