Buying a home is considered a major financial milestone these days. However, just because we’re “supposed” to buy a home doesn’t mean that we should.
There are a number of circumstances in which buying a home might not be the best option for your finances at a particular time. Before you decide to make a huge purchase, it’s important to consider whether or not you are truly ready for it.
Are Your Finances Stable?
One of the most important factors in deciding whether or not you are ready to buy a home is your financial situation. Do you have stable finances? Can you handle the expenses that come with home ownership? Keep in mind that these expenses go beyond just your mortgage principal plus payment. You also need to be able to handle the costs of maintenance and repairs, as well as handle the utilities (especially true if you move from an apartment to a bigger home that requires more power).
Take a look at your financial situation. Do you have a reasonably stable job? What would happen if you lost that job, or your hours were cut? Before you buy a home, it’s important to make sure that your financial situation is fairly stable, and that you have an emergency fund that can help you cover costs should it become necessary.
Do You Plan to Stick Around?
Unless you plan to turn your home into a rental property at some time in the near future, it’s important to look at your life situation as well. Are you planning to stay in the same area for a few years? If you know that you will likely move within a year or two, it usually doesn’t make sense to buy a home. It will be hard to recoup the costs of buying a home, even if you manage to sell at a slightly higher price than you paid.
Additionally, there are emotional aspects involved. A home — as your primary residence — is not really a financial investment. It’s more of an emotional investment with sentimentality to drive its worth. Are you prepared to put time and effort into the home to make it your own? And will you be there to enjoy it?
What about Market Conditions?
In the United States, now is a great time to buy. The real estate market hasn’t recovered from the mortgage market crisis that took place from 2007 to 2008. Prices are still fairly depressed and interest rates are at record lows. In Canada, however, the real estate market is still a hot. There are indications that the housing bubble could be about to burst, though.
If this is the case, you don’t want to be buying a home just before everything collapses. If the real estate market really is headed for disaster, it might be a good idea to sit tight until home prices plummet and you can get a really good deal.
In the end, though, you need to consider what is best for your situation. Think about what you want, and what is most important to you. Think about your situation, and determine whether or not you are ready — emotionally as well as financially — for home ownership.