Another year will soon come to an end and that probably means you’ve paid another 12 months of rent to your landlord. Perhaps you're now thinking to yourself, "Wouldn’t it be nice to be making a mortgage payment on a house instead?" After all, that means you'd earn some equity over time. But while the thought might be nice, as you think through the possibilities, remember that there are a lot of serious and significant issues to consider before committing to buying a home. One of the most important things to do is to learn the facts so you can determine at what stage in your life you should really start thinking about homeownership.
First, don’t rush. You probably are going to live a long, long time, meaning you'll have plenty of years to think through the decision about the largest and riskiest purchase you will ever make. So relax and take a few years to educate yourself on homeownership. Keep in mind that while owning a home can have some great benefits, there are also many negative aspects. This is especially true if you are young, making it more likely that you're unsure of where you finances are going.
If you are in your twenties and just starting out in your life outside of school, don’t worry about owning a home for a while. There are lots of responsibilities that come along with homeownership, some of which are very financially taxing. As the homeowner, you'd be responsible for not only the mortgage, property taxes, HOA fees, and insurance, but also for the maintenance, repairs, and any uninsured disasters that may occur — and those do occur occasionally. That may be too much to handle for those who are just starting their careers and whose salaries and lack of savings may not grant them much of a financial cushion in case financial trouble arises. You don’t want to be seriously stressed over money and bills when you are young, and a house payment would probably be the biggest source of that stress. Instead, just focus on renting or living at home and enjoy your still (relatively) carefree lifestyle. You can prepare for your eventual homeownership by thinking through what you want to do with your life five to ten years down the road.
Additionally, if you are unsure of your financial picture going forward, hold off on buying property. You may be able to qualify for a loan if you have a solid job, but if you think you may lose that job or your salary or hours could get reduced, skip the potential stress of homeownership. There is no need to add the burden of a large, fixed housing payment if your income stream is at risk of being disrupted for any reason. Renting provides much more flexibility, and you'd still retain the option of ending a lease to move into a much less expensive place or with family if needed.
Also, if you think you may be moving out of the area, going back to school, or changing jobs in the near future, there is no need to add the stress of a house payment to your routine. Remember, there is plenty of time to buy real estate a few years down the road and start building equity and wealth. Renting is the option that reduces the risk that you will overextend yourself or get stuck paying a mortgage payment on a house you won't even live in.
The time to buy is when you are past your twenties and therefore more likely to have settled down in terms of career and family. This is also when you are more likely to be interested in starting to build your wealth, starting a family, and have a solid employment situation where you can count on getting a monthly paycheck.
When you have most or all of those things in place, homeownership is something you can feasibly tackle, so if you're young, enjoy life and live mortgage-free! Once you are more settled down, that’s when it is time to join the world of homeownership.
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