The typical “American Dream” is owning your own home, however, if you’re not able to swing it financially, it could end up being your worst nightmare. Some questions, you might want to ask yourself :
- How much are you gonna save up for a down payment and closing costs?
- How do you know how high a mortgage you will qualify for?
- How much can you really afford based on your lifestyle?
- How much will you really save in taxes?
The key point here is home ownership is not for everyone and there is nothing wrong with that. If your lifestyle requires you to change jobs often and move or get transferred every year or so then it makes perfect sense not to buy. Typically, it takes 4-6 years to recoup the money you pay in up-front costs and the cost and fees.
You may also be happier renting if you’re not comfortable with performing your own repairs and maintenance and you can’t afford to hire someone else to do it for you. There are plenty of people who enjoys the benefits from living in apartments, benefits such as like swimming pools, recreational features and the flexibility of being able to move without too much trouble. You want to think about whats important to you, there is nothing wrong with renting if it suits your lifestyle.
For those who do want to own a home, you want to make sure to avoid being house poor. You don’t want to put your self in a situation where you have such high house payments that your a prisoner to your own house and cant afford much of anything else. You may think at first that buying your dream house is worth the sacrifice but years of doing without the enjoyment of vacations, new furniture, new cars, eating out and just other simple life pleasures can make your dream house into your worst nightmare. Becoming house poor can also affect your relationship with your spouse or partner.
The general rule of thumb you want to stick to is to buy a house that costs less than two and a half times your income. For example, if you and your spouse make $100,000 together, then you want to try to keep your home price under $250,000.
I think its a shame that a lot of people can’t afford a house now. When my father bought his first house it didn’t even cost a year’s wages.
I built my first home for $23,000.00. That was in 1977. Living space was about 1500 square feet on the first floor. That was not that long ago. I was just looking at a small cabin on a lake in northern Wisconsin. The cabin was 800 square feet and was appraised in February for $230,000.00. Of course lake shore is pretty pricey right now.
The rule of thumb as discussed in the well written article above is that that your can afford a home up to two and half times your annual income. This was the case for many years, but as in South Florida and many places across the country, this may be to overbearing for many families.
With the rising price of gas and the uncertainty in the economy, it’s a very difficult time to purchase a home. Down here in South Florida that taxes alone on a $250,000 home is over $5000 a year! Then tack on a $200 a month insurance policy and some PMI and you could be paying 2,400 a month just for the mortgage. Be careful out there right now as you many get approved for a loan for more than you would ever want to make payments on. Being cash poor, as discussed in the article above, is no way to live life.
I will probably wait to buy a home until I’m getting ready to start a family and know that I have a good, steady job.
Renting serves me just fine for right now.
Actually I read an article the other day that said that due to the slow down in the global real estate market, many properties are now actually cheaper to rent than pay a mortgage on. Add to that the fact that many banks and investment companies think we have another 2 years or so until we hit the bottom of the market, renting right now might be the smart thing to do…