Is Buying A Home Still Worth It?
I opened Reddit this morning to find a post entitled “I worry about many of these first time home buyers”. Curiosity drove me to see what people were saying, and what their experiences were. Especially since first time homebuyers are the main category purchasing homes right now.
The argument against homeownership
The poster emphasized all the general fears that people have about buying a house:
- That owning a home is expensive, and that whatever you plan on will cost your double or triple
- That buying with the bare minimum of funds is asking for disaster
- That people are struggling year after year with their mortgage payments.
All of these points are valid, and there are certainly people who are struggling. Comments on the thread however bring to life different perspectives and experiences.
The pro homeownership argument
Balancing fears with real life experiences, here is what other comments had to say in regards to their own homeownership journey:
- being single is a good time to purchase because there’s less on the line, and it’s easier to budget
- people that took a chance and bought in the early years of market recovery call it the best decision of their life – even if it was an unpopular decision at that time (think 2011). They report decades in a home without any major issues.
- much of the work people have done on their homes has been by choice, not necessity. New deck, anyone?
- in some markets, rents are are high as mortgage payments; one will keep going up, the other can be fixed for 30 years
Mitigating risk
Due diligence is key, and it’s not just the due diligence on your purchase contract. It encompasses
- don’t overextend on the mortgage payment
- don’t purchase a home that needs immediate repairs if you don’t have the funds, regardless of how great of a price you can get that home for
- get a good home warranty with your purchase (it can help with all the major appliances and systems should they fail)
- trees close to the house can be a liability; Damage to the roof, plus a tree removal can cost thousands – something to be aware of
- adding a roommate can be either a strategy, or a last resort in helping you make mortgage payments
- having good credit can give you access to 0% interest short term loans that can help you with unexpected repairs by spreading out the cost
- everything in life is a gamble; you can have 6 months’ worth of expenses saved up and if a 7 month emergency comes up, you’re still in trouble. “Trouble” tends to be less troublesome when you have equity in your home.
My own experience
In my experience as a homeowner and a mortgage loan originator, things work out more often than not.
I purchased my home with a minimum down payment on an FHA loan, and most of the loans I’ve done over the years have been to first time homebuyers. Most of them scraped together the minimum down payment, used down payment assistance or 100% financing loans such as VA or USDA mortgage loan. I then helped some of the same people purchase either new homes, or investment properties using equity from their first home purchase.
I’ve seen first had how owning a home can improve financials for the better.
One can of course argue that these are different times. Home prices are up, and so are interest rates. Maybe this past decade has just been a stroke of luck for a selected few?
Except much of the same fears ruled 10 years ago too. The fear of purchasing a home after the market had crashed in the way it did. The fear of not having enough saved. The cheap rents people were reluctant to let go of.
The future of homeownership
Renting or owning is still a matter of choice to some degree. But what happens when it’s no longer a choice? When institutional investors and real estate trusts start owning larger and larger shares of housing inventory, outbidding individual buyers with cash offers. Soon enough, homeownership could be reserved only for the wealthy, and for large investment firms.
A home means different things for different people. Sometimes, no matter how much of a financial cushion you have, you’ll never truly feel safe enough to want one. The people that are truly doing well as a result of their homeownership choices are rarely vocal about it. Especially in an environment where affordability is an issue, and many are struggling.
The internet is a place for complaining, and asking for help from random strangers. If owning a home is your long term goal, I can help. Email me the details of your situation at [email protected] or apply online to get started with a purchase application.
