Five Signs You May Not Be Ready to Buy, Yet.
There might be some dissent among housing professionals, but not everyone needs to own a home right now. Let’s face the reality, some people out there have no business owning a home at all, ever.
Most of you, however, will eventually buy a home and be perfect homeowners. You just need to do a little legwork and address a few poor early 20’s life choices.
Some of you are completely qualified to buy right now. You have great credit, ample assets, and a solid income. Having these qualities qualify you to buy, but should you?
Whatever your boat, here are some of the reasons you might consider waiting.
1: You Might Relocate Soon
Commissions, closing costs, and other fees will cost you around 5-7% when you sell. If you held the home less than two years you will also have to pay capital gains tax. Hold it more than two years and you avoid that burden.
Of course, you could always rent the property when you move, but do you want to be a landlord? Many people enjoy the income it provides while others enjoy not dealing with tenants of questionable intelligence, cleanliness or financial responsibility.
2: Your Job (or Income) Is Not Secure
Economies are cyclical, but they are also subject to societal whims or technological advancements that render them redundant.
Self-employed or working for a Fortune 500 company, it doesn’t matter. If you lack the wiggle room needed to absorb a slow year or a few months off then you need to consider that heavily.
Be very careful combining a lack of security with either of the next two reasons you might want to wait.
3: You’re in a Ton of Debt
Heavy-debt makes it harder to qualify for a mortgage. It throws your debt to income ratio into the red-zone, makes it difficult to save for a down payment and lowers your credit score.
In other words, it takes the decision to buy out of your hands because it is simply not a possibility.
4: Your Assets for a Down Payment Are Slim
You do NOT need to save 20% for a down payment. Of course, housing becomes more affordable due to the lack of mortgage insurance when (PMI) you the 20% to put in.
However, you need to remember that there’s more to buying a home than down payments and closing costs. You have an inspection, appraisal and the cost of moving to consider. you might need some new furniture too.
If you have to put any of those expense on a credit card you should pause and consider your decision. Don’t let the closing process wipe you out, you need money for additional expenses.
5: No Budget for Additional Expenses
Don’t fall into the trap of thinking your mortgage will be your only expense. While you were a renter, your rent may have been your only home-related expense, but as a homeowner, you need to pay the plumber, electrician, handyman, roofer, HVAC company and more.
If the home is located in an HOA-governed area, you’ll also need to pay associated fees. Make sure you have enough wiggle room in your budget for these bills.
Amazon.com Best-selling author, Shashank Shekhar (NMLS 8176) is a mortgage lender with Arcus Lending, offering loans for home purchase and refinance. Shashank has been featured as a mortgage expert on Yahoo! News, ABC, CBS, NBC and FOX. He has been named "Top 40 under 40" most influential mortgage professionals in the country.
