There’s a lot of pressure on millennials in their mid-20s and early-30s to start thinking about buying a home. It’s viewed as one of those boxes that everyone needs to check in order to truly enter adulthood. But the fact of the matter is that not everyone is prepared to buy a home. Just because you’re getting older, doesn’t mean the timing is right.
It’s easy for people to look at you and say, “It’s time for you to settle down and buy a home.” But remember, they aren’t the ones actually writing the check and making the investment.
While it’s possible that you are, in fact, prepared, here are some signs that you’re better off continuing to lease in the immediate future.
1. You Barely Have Enough Cash for a Down Payment
If you’re interested in buying a home, you’ve probably run the numbers before and come to the conclusion that you can afford the monthly mortgage payment. What you may have failed to consider is that you have to make a down payment and cover closing costs.
Let’s assume, for a moment, that you’re purchasing a $200,000 home that requires you to put 5% down. Closing costs tend to average 2% of the purchase price (but can go as high as 5%). Using the average numbers, the total amount you would owe at the closing table for a $200,000 home would be $14,000. If you don’t have a lot in savings, that number may be unrealistic.
2. Buying a Home Will Wreck Your Budget
Let’s say you can make the down payment, cover the closing costs, and afford the monthly mortgage payment. Well, you still might not be a good candidate for buying a home. Consider what the mortgage will do to your budget. If it leaves you with just a few dollars of breathing room, then it’s probably not a good idea to put such a tight constraint on your financial situation.
3. You Don’t Have the Time or Money for Repairs
One of the things you may take for granted as a tenant is the fact that things like landscaping, repairs, and maintenance aren’t your responsibility. All you have to do is place a phone call to your landlord and they have the legal obligation to handle issues.
Well, all of that changes when your name goes on the deed. If you don’t have the time or money to handle repairs, home ownership probably isn’t a good option.
4. You Spend a Lot of Time Traveling
For people who spend a lot of time traveling for business or pleasure, home ownership isn’t always the best idea. It might make more sense to take the money that you would be spending on a down payment, mortgage, home repairs, etc. and instead apply that money to finding deals on accommodations in the cities you frequently visit.
For example, if you visit Washington D.C. often, hotel stays can run from the low $100s all the way to the high $700s. Can you afford frequent hotel stays and a mortgage? It’s definitely something to think about before you pull the trigger on a home.
5. Your Credit Score Is Too Poor to Buy a Home
Do you have a bad credit score? You may assume that qualifying for a home loan is the only thing that matters, but having a poor score can cost you tens of thousands of dollars over the life of your loan. It can also elevate your monthly payment considerably.
While you may feel the pressure to buy now, you can actually save a lot of money in the long run by waiting until your credit score improves.
6. Your Income Isn’t Stable
Did you just start a new job? Have you decided to venture out on your own and become a freelancer? When income isn’t stable, it’s best to wait a few months rather than buy a home right away. The last thing you want is to base your mortgage on information that’s likely to change in the near future. This could leave you in a world of hurt.
There’s no reason to rush into home ownership if it’s going to set you back financially for years to come. Take your time and be as patient as possible. You’ll know when the moment is right and your family will be glad that you waited.