How to Know if It's Wrong Time to Buy a Home

If you’ve heard it once, you’ve heard it a thousand times, the words resonating off your apartment walls.

“You need to buy a house.”

More often than not, you’ll be subjected, as a renter of property, to the advice that has helped and plagued the masses depending on where you are financially.

The idea that a house is a good investment versus renting has always been predicated on the point that with a home, you’re spending money each month on a mortgage and you’ll own the property, investing the monthly expense toward something that is “yours.”

The flip side is renting, where you’ll hand over your money to someone else, and the only thing you’ll have to show for it is a place to live, minus owning it.

But just because buying a house makes sense in the overall dialogue and subject matter of finances as far as investments go, not everyone is prepared to take on the ins, outs, good and bad of owning your own home.

And the bad stretches far beyond just home repairs but also has to do with monthly budgetary expenses, and perhaps, if not likely, an increase in the monthly amount you’re paying versus the rent.

The statistics, particularly among the Millennials (ages 21-34), would suggest that owning a home isn’t all it’s cracked up to be. That demographic leads a shift in the mindset that owning a home is always the best option.

Roughly 70 percent of the Millennials generation regrets buying their home, with still 46 percent of Millennials renting, 42 percent buying, and the overwhelming reason they’re questioning this purchase is more about ongoing costs than anything else.^[1]

Some, not just Millennials, also are unhappy about how much they’ve laid out for the down payment, thus subjecting their “savings” or “nest egg” to be depleted just for a piece of property. That fact isn’t lost on a recent study stating that 33 percent of the American population states they’re overpaying for their homes.^[2]

Another number is nearly at 50 percent (44 to be exactly), and that’s the overall number of people who have buyer’s remorse, suggesting they would have done things over again as far as buying their home.^[3]

While some say they wish they would have gotten a bigger home, others surveyed are quick to point out that mortgages and home responsibility is more than they bargained for, ultimately.

This could be predicated on affordable living space hard to come by, but when you factor in the owning piece of the discussion and that you can’t call a landlord for fixes or taxes, you almost feel as though you’d have little trouble talking yourself into renting versus buying.

Buying still has its advantages, though, but only if you’re financial responsible and are earning enough, following rules of buying and making sure you’re not taking every last dollar for your home.

Numbers from only two years ago showed that the average down payment on a house is $16,000, so you also have to question if that’s worth it to you, and if you ultimately have that kind of money to spend.^[4]

What often is overlooked in this heated discussion is how much you should be spending on a mortgage in conjunction with your income.

Earlier it was mentioned that some have buying regrets because they wanted a bigger house, so you have to wonder aloud if they’re on the same page as the 35 percent rule.

This suggests that you should only spend 35 percent of your gross monthly wages on housing.^[5]

If you’re only making $3,000 per month, gross, you should only be spending around $1000 on your mortgage.

A lot of factors go into how much you’re not only spending but if you should buy a house at all.

While some believe that the ownership piece greatly outweighs the renting, others aren’t quite as sure.

Here’s how to know if you’re not ready to buy a house:

Present tension: You can’t afford your lifestyle now

The staggering number of people who are in the midst of a lifestyle, expenses and other financial woes is staggering, with nearly 60 percent of the population living paycheck to paycheck, with no clear end in sight.^[6]

If you’re someone who is in that group, then buying a home isn’t the best idea for you.

Sure, you can find home loans that will allow you to only put 3.5 percent of the total purchase price as a down payment, with some as low as $500.

That can be enticing, particularly if you’re content on having and owning a home, and could see yourself being able to scrounge up a few dollars or, worse yet, charge it to a credit card as a cash advance (please, don’t).

The fact remains that nearly half of the population admits it can’t afford to live, from one month to the next with 40 percent of people saying they can’t pay their bills.^[7]

That percentage is startling, but also plays into why some often to not buy a house and instead continue to live without the surprise and additional expense a house can carry with it.

Most Americans also are quick to say that a $500 expense would be more than enough to surprise them to the point that they can’t pay and would put them into more debt; 63 percent of people say they don’t have that much lying around (so maybe that down payment mentioned previously isn’t doable).^[8]

No matter if you’re being lured or charmed into buying a house by that advice about investing money and not throwing it away renting, you can’t look past the facts.

If you aren’t affording life now, a house is only going to add to your plight.

Savings panned: You don’t have any money saved at all

Much like a $500 expense would surprise most, you also have a fair number of people who have little to no money saved at all.

About 37 percent people of the total population says they would be able to pay off a surprise expense of $1,000.^[9]

That minimal amount can be flipped on its ear and told from a different perspective: most people don’t have any money saved. That same study said that even a minimal amount of money in a pinch, in this case $400, that 46 percent say they couldn’t find that amount of money, either.

Basically, if you’re not putting aside money on a weekly or monthly basis, and you have less than $1,000 in your bank account, then buying a home doesn’t belong on your radar.

The problem is most assume that, if they have saved money, they’ll use it all on the down payment for a house, but that leaves you with zero amounts of wiggle room as far as anything home related.

Even if you wanted to plant a flower, you’d have to wait until you get paid, and that’s a sure-fire sign that you’ll be “house poor,” a phrase that categorizes someone who overpaid for their house or more than 28 to 30 percent of their income is spent on housing and thus they don’t have anything else left to spend.

And if your plan is to borrow that down payment, too, think again.

Buying a house should have at least a 10 percent, bare bones down payment put toward this endeavor, although 20 percent would be better.^[10]

Debt concerns: You’re debt to income ratio is not good

Credit card debt, student loan repayments and other money that already is going out the door should be thoroughly evaluated before you contemplate buying a home.

You’ll be hard pressed to find a way to continue paying for a plethora of debt, and then on top of that put yourself in a position to pay a mortgage and worry about expenses, some of which you may have to continue borrowing or charging if money already is tight.

Student debt, particularly for Millennials, dogs them with higher monthly payments to go with other debt they might carry. There is more than 1 trillion dollars of student loan debt in the United States, and the average borrow owes just a little more than $37,000 per year, which is a considerable hike in recent years; that number was around $20,000 in 2005.^[11]

Regretting that you bought your house will sink in almost immediately if you’re someone who has a lot of debt, and is spending more than the 30 percent of your gross income that should be used for debt repayment.

Credit card debt is the proverbial elephant in the room, too, with that number up 3 percent since last year, and seemingly growing to more than $6,000 per person.^[12]

If the idea of buying a home equates to you spending less money per month, such as a mortgage that is lower than rent, you can still entertain the idea of buying a home. But if you’re adding to your monthly expenses, and you haven’t or don’t expect to earn more money, not only is the monthly living cost too high, but your income hasn’t changed to offset it.

That budget 101 stuff pales in comparison to you spending more per month on housing and still saddled with paying back credit card debt, too.

Stay put in your apartment if it’s less than a mortgage would be and continue to focus on minimizing housing costs for now so you can focus on the unsecured debt that will follow you into your new home, without question.

As much as we want to feel as though we own something, you can’t look past shortcomings you may have financially that impedes your path toward buying a home.

Ownership is remarkable, and feels amazing that you’ve accomplished something special, but doing it at the expenses of your finances hardly is worth what will be short-lived jubilation, especially if you’ve spent too much or maxed out your mortgage.

Financially speaking, too, you aren’t just fixated on the dollar amounts either as you might want to consider if your job is one that can be relocated, and if that possibility exists, what it would take to do that.

Would you lose money on reselling your house? Lots of thought, question and time have to be put into this decision, and doing so can’t be an impulse buy.

When you consider that almost 40 million Americans are living in housing they can’t afford, and home buying is declining, you might start to think a little longer about falling prey to what others are experiencing.^[13]

If you’re ready, buy the house and enjoy the investment and equity that comes with it.

Those who aren’t should temper their want for a home and realize that dream will come in due time, most importantly when you’re ready financially.