6 Signs You Cannot Afford to Buy a Home
Purchasing a home is a huge life decision. Doing so should not be taken lightly. Too often, young home shoppers will simply look at the mortgage payment and compare it against what they are paying in rent. When looking at home ownership in that light, it seems like a no brainer that you should, and could, purchase a home. However, owning a home entails much more than just making the mortgage payment. It includes coming up with a decent down payment. It also includes paying for anything that breaks in the house; remember, there is no landlord anymore. So, before you try to get your slice of the American dream, you should make sure you can afford to do so. Below are some signs that you may not be.
The 6 Signs You Cannot Afford to Buy a Home
1.You have no savings. If you have to scrounge every last penny to simply meet the closing costs and down payment to get into the home, then it is very likely that you aren’t ready to own a home. Things will break in your house. Even if they don’t, you have more bills than you did when you rented, so you will be paying out more than you ever did. Finally, if you have any delusions on furnishing this home with your good looks, good luck. Furniture stores only take cash…or credit.
2. Excessive use of credit cards. If you are using credit cards for everyday items, then you probably aren’t ready to buy a home. Using credit cards to cover basic living expenses is a sign that you are a bit overextended right now. Once you purchase a home and move in, you will have a lot of difficulties maintaining a budget.
3. Making only minimum payments. This is another sign that you may not be ready to buy a home. Having debt is one thing, but only being able to pay the minimum payments is an indication that you are stretched financially.
4. You are going to borrow against your retirement for your down payment. If you need to borrow against your retirement to come up with your down payment, that is probably a big red light that you aren’t ready for home ownership. If you haven’t been able to save over time, then your budget after you move in will prove to be very tight and most likely you will have difficulty keeping up on routine maintenance or simply paying bills.
5. You need to work two jobs to get approved for a mortgage. If you are in your career of your choice and still need to work a second job, then it may not be a great idea for you to purchase the home you are looking at. Perhaps a smaller home may be a better a choice. Better yet, continue to rent until your income gets to a level to support home ownership.
6. You need roommates to cover the mortgage payment. Just the same as needing a second job to pay your mortgage, requiring roommates is equally as troubling when it comes to owning a home. That isn’t to say that it is a bad idea to bring in roommates to help out, but if you are requiring them, then that is sign that you may be in over your head. Keep in mind, roommates aren’t contractually obligated to pay your mortgage.