How to Spend Money Wisely » Real Estate

Are you ready to buy a home?

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 homeownership? 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 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 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 homeownership.

Comments

  1. Lance@MoneyLife&More

    Things do pop up in homeownership! I just replaced my AC unit which was a huge expense. If you can’t budget for these things then you could be in trouble buying a home.

  2. My Own Advisor

    Good post Tom.

    I think too many people are caught up in the “home as an investment” mentality. I prefer to think of my house as a home, an asset sure, but also a liabilitiy with all its expenses.

  3. Cliff Stevenson

    In the 50’s and 60’s, a home was a roof over the family’s head, and a place for the family to grow. Not sure when it changed to being the ‘most important investment of your life’ (and I know that’s arguable), but it’s definitely the mindset these days.

  4. Katia

    Highly descriptive blog, I loved that a lot. Will there be a part
    2?

  5. http://bha-dk.biz/

    Definitely believe that which you said. Your favorite justification appeared to be on the
    net the simplest thing to be aware of. I say to you, I certainly get annoyed while people think about worries
    that they just do not know about. You managed to hit the nail upon the top as well as defined out the whole thing without having side
    effect , people could take a signal. Will likely be back to get more.

    Thanks

  6. Kathaleen

    Hi there, after reading this amazing piece of writing i am too
    cheerful to share my experience here with mates.

Leave a reply

Your email address will not be published. Required fields are marked*