Tuesday, October 19, 2010

7 Reasons To Not Buy A House

Sign of a mortgage centre in East LondonIf your thinking about buying a house or renting, there is no easy answer. Your decision consists of balancing several personal factors, including your finances, location and life situation. 
Before the housing meltdown it was easy to decide. Conventional wisdom said buy it now because it would just be more every year you wait. It's a good investment for your future, is what we have been taught. 
Today's, buyers are a lot more careful. They see a not so sweet future between even having a job and committing to a long term debt like a mortgage. With houses looking like just a necessity and not an investment, people are nervous. 
Should you buy or rent? Here are a few things to think about before you make the plunge. 
1. Will you be in the area long enough for the house to be worth purchasing. If not, why not just rent until you are sure of the area and neighborhood. 
2. If your thinking of borrowing from your retirement savings to make the down payment, your not ready. Just save for the down payment till you have enough to put down to get the mortgage. You can always borrow money for a house, but you cannot borrow money for your retirement. 
3. Are you in credit card debt? It's best to be debt free when buying a house. What could go wrong, probably will go wrong. Your new home could be in a state of repairs for years, do you have enough money for this contingency. 
4. Do you have an emergency fund of 3 to 6 months expenses. Being house poor will force you to go into debt because your not ready for the rainy day. So start one and be prepared. 
5. Be sure your mortgage payment is not more than 30% of your monthly income. If it is higher you will never have any cash to take care of the house payment and do anything else. 
6. As a home owner are you prepared to deal with all the maintenance that goes along with ownership. Even basic up keep is expensive. If your not into home maintenance maybe it's better to rent. 
7. Are you sure about your current and future life situations. Are you getting married or kids about to fly out of the nest. If the house meets your needs today, will it meet the needs in 5 to 10 years. 
The simple answer is there is no simple answer. Your individual needs can only be sorted out by you. Remember your home can be not only an investment but also a place of security, comfort and central to family life. It can be a dream. 
But can also be a nightmare. 

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