When Buying a House Isn’t Worth It: 8 Reasons Not To Buy a Home

FT Contributor  | 

1. You Have Poor Credit

Your credit is an important factor that lenders take into consideration before offering you a mortgage for your home purchase. The lender examines your overall credit score and credit history. If you have a poor credit score or less than desirable credit history, traditional lenders may deny you a mortgage.

If a traditional lender does offer you a mortgage with your low credit score, the terms may not be favorable. You could be offered a low loan amount that isn’t enough to purchase a suitable home for you and your family. The lender may offer you a high interest rate or an adjustable interest rate, which means the interest rate can change with the market and increase the monthly payments you owe.

If you still think you’re ready to buy a home even with a poor credit score, you may be able to find alternate ways to finance your purchase. Hard money lenders are individuals who provide private loans to consumers by placing the property as collateral. The terms for a hard money loan may also be unfavorable and if you can’t make the payments, the hard money lender takes over ownership.

2. You Have Little or No Job Security

Your income ensures you can make your mortgage payment each month. If you have a seasonal job or an occupation that doesn’t offer a lot of security, such as a freelancer position or small business ownership, you may want to wait on purchasing a home.

If your job doesn’t feel secure, you may not be able to pay your mortgage each month, which can lead to you defaulting on your home loan. If you can’t catch up on your payments after a few months, the lender may begin the foreclosure process. The loan provider has the right to take over ownership of your home and sell it if you stop paying your mortgage.

3. You’re in an Unstable Relationship

It’s important to consider the stability of your relationship before deciding to purchase a home. If you’re planning to buy a house with your significant other, chances are you’re including their income as a contribution to the home’s expenses, such as homeowner’s insurance, property taxes, and home repairs or upgrades.

If you go along with making the purchase but your significant other moves out a few months later, you’re stuck paying your monthly mortgage payments and other home-related expenses on your own. Without assistance from your partner, you may be forced to live on an extremely tight budget or request a loan modification, which can negatively affect your credit. If you simply can’t afford your mortgage payments anymore and stop paying, your lender may begin the foreclosure process.

4. The Market Is Down

The real estate market is affected by many factors, including whether the economy is in a recession or depression. Since the market is constantly changing, it’s almost impossible to time your home purchase at the perfect moment when home prices are at rock bottom. If you can achieve this, your property value will most likely increase over time.

However, if you don’t time the purchase just right, your newly purchased home’s value may rapidly decline right after you buy it. If you weren’t able to purchase your home for a price below comparable sales in the area, you’ll find it tough to build equity if the market continues to flounder.

5. You Have Little Savings

While most home buyers generally take out a mortgage for the majority of their home’s purchase price, there are other costs associated with buying a home. You may qualify for property tax deductions or other financial benefits of homeownership. However, it’s important to have a hefty savings account ready to help with your mortgage down payment, homeowner’s insurance, and closing costs.

You should also have money left over after you take over ownership of the home for maintenance or home repairs. Not only do you need money to buy a home, you also need money to keep it maintained properly so its value doesn’t decrease. If you don’t feel financially prepared with a good chunk of money to contribute, it may be best to wait before buying a home.

6. You Have a High Debt Ratio

In addition to your credit score, lenders also look at your debt-to-income ratio. This is the amount of debt you currently have compared to the income you earn. If you have a high debt ratio, lenders are more wary of providing you with a mortgage.

You could still qualify for a home loan, but your mortgage offer may include a low loan amount or high interest rate. Since you already have a lot of debt, lenders aren’t sure you’ll be able to make your monthly mortgage payments when you take on more debt in the form of a mortgage.

7. You Move or Travel a Lot

When you buy a home, you’re making a commitment to the house and its location. It’s only a good idea to buy a house if you’re ready to settle down. If you travel a lot and don’t necessarily need to own a home yet, it may be beneficial to wait until you spend more time in one place. If you enjoy moving frequently and you’re still not settled on the location, community, or neighborhood you want to live in, a home may also not be a good purchase now.

8. Owning a Home Takes a Lot of Work

When you purchase a house, keep in mind you’re responsible for its maintenance, repairs, and the costs associated with upkeep. Even if you have a plan to pay your mortgage off early or use your money for something else, your plans may easily be derailed by an unexpected home repair, such as a roof leak or dysfunctional air conditioning handler.

When you’re a tenant, your property manager or landlord usually takes care of repairs and maintenance as needed. However, as a homeowner, you’re in charge of identifying maintenance and repairs that need to be addressed, finding reputable professionals to assist you, and providing payment for materials and labor. Minor repairs won’t eat into your budget too much but if you’re facing a major home repair, you risk losing financial stability if you’re not prepared.

When deciding whether you should buy a home, it’s important to consider your current financial situation and your future goals. If you’re not ready to commit to a location or you don’t feel financially prepared for such a big investment, it may be best to hold off on your purchase.


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