March 18, 2013
Buying a home can be a mistake. When is it the right time and when is it the wrong time?
Buying a home can be a mistake. When is it the right time and when is it the wrong time?
Buying home is typically the largest expense most people make. Many people don’t take the time to properly prepare for this large purchase and for the debt and other ongoing costs associated. Buying a house isn’t necessarily the best decision for everyone. Most people would suggest that you can easily live in a house for at least 5 years and have 20% of the cost in cash, plus sufficient income for house payments, insurance, and maintenance costs. This is the minimum required to break even on purchasing a house.
It is the right time to buy a home when you have 20% of the price of the home set aside for the down payment, you have gotten rid of your debt, your emergency account will not be depleted after making the down payment, and the relationship with your spouse or significant other is strong. It is the wrong time if your payment is above 30% of your gross pay, it is a starter home, you have intentions of moving within 5 years, your credit score is low, and if you do not qualify for a 15 year fixed rate loan.
Outstanding answers! Let’s recap. The right time to buy a home is when you are financially prepared and ready to settle down for a long period of time in one spot. Buying a home is a very big commitment and should not be taken lightly. It will cost you a great deal of money and if you are not prepared, it can easily lead to some very negative financial consequences. Let’s look at a few details as we recap what Aaron and Katherine stated.
Buy only when you will be there for 5 years or more.
A home is a place to live, not an investment. It will cost you.
Make sure you and your partner have a solid relationship.
Be a consistent saver. This habit will help you prior to owning.
Put 20% down on the home to avoid PMI.
Strive to get a 15 year fixed loan, but settle for a 30 year.
Keep your entire payment under 30% of your gross income.
Avoid starter homes. They benefit others, not you.
Get your credit score above 700, ideally above 750.
Shop around for the loan.
The location where you buy is a BIG DEAL.
Buy only the amount of house you need. Save in property taxes.
Don’t let others tell you when to buy. Buy only when you are ready.