Should You Own the Place Where You Rest Your Dome?
This is a tough question, particularly for city-dwellers. We have all heard the lessons our parents have taught us about the importance of home ownership, but let’s be real, we live in a very different time. The “American Dream” of owning a home, having 2.5 children, a dog and a white picket fence have long since dissolved. In these economic times, hell we are lucky if there is even roof over our heads. So is it wise to buy your home or should you continue to rent (or couch-surf if that’s your predicament)?
In order to really figure this out, you would have to do some serious mathematics. Simple things are where you should start. For example, you obviously need to look at how much money you are bringing in, what you have saved up, how much debt you are currently carrying and any assistance you may be able to get (wedding gifts, gift from dear old mom and dad). Then you need to look seriously at how much home you can afford. Here is a pretty decent calculator from Bankrate to get you started: http://www.bankrate.com/calculators/mortgages/new-house-calculator.aspx.
Another thing that you will want to do is to become familiar with all the homeowner vocabulary. Everything as it relates to home ownership, mortgages, interest rates, etc. This is the biggest investment you will ever make so you need to make sure that you do your homework. If you get overwhelmed by mentions of an acceleration clause or LTV make you nervous, you should probably wait a bit longer before considering buying a home.
Once you have figured out how much home you can afford, you then have to take a bunch of other expenses into consideration. If you are buying a condo or co-op, you must consider maintenance, which in some cities can be almost as much as your mortgage payment. If you purchase an older home, you should also have money saved up for emergency repairs.You must carefully look at any apparent expenses as well as have enough money for any unforeseen expenses (i.e. appliance replacements, etc.).
Not only must you have enough money to be able to afford a place there is one key element that you must also have in order to buy your “dream home”. That element (drum roll please…) is good credit. Yes, your credit must be pristine in order to get a mortgage in 2011. Long gone are the days where they would take you if you had a few dings and dents in your credit. Just as the banks are subject to more scrutiny by the government, so is your credit.
You may very well find that it’s easier to rent a place. Since times have changed, we are no longer looked upon as a drifter just because we don’t own a home. It’s perfectly fine to rent an apartment, have a bunch of roomies or crash wherever you can find a safe place to sleep. Let’s face it, get money out of a bank for anything nowadays is quite difficult. They are no longer passing out loans like candy so the lending criteria is much more stringent than it was even 4 or 5 years ago.
The upside to renting is that you never have to pay to fix anything! That is your landlord’s responsibility. Nor do you have to mow the pesky lawn, shovel snow, carry insurance (unless you choose to), hell you may not even have to drag your garbage cans to the curb on trash pick up day.
The decision is really up to your heart and more importantly, your wallet! All of us dream of having our own home one day, but your brokeass needs this tender reality check. If you can’t afford it, pop that bubble over your head with the perfect house, picket fence and dog barking in the yard because you could end up facing the same fate as many Americans, foreclosure, if you aren’t careful.
Photo Credit: Well Heeled Blog