With mortgage interest rates as low as we can remember and the S & P Twin Cities home price index back to 2001 levels you have likely been hearing a lot about what a great time this is to buy a home.
That may be true, but not everyone is ready to become a homeowner… and homeownership doesn't make sense for everyone.
If you are questioning whether it makes sense for you, here are some good reasons not to buy a home right now…
No down payment
Unless you are a vet qualifying for a VA loan or you qualify for other limited down payment assistance programs you will need a minimum down payment of 3.5% for an FHA loan or 5% for a conventional mortgage. Good news for some buyers is new Fannie Mae guidelines will allow borrowers to use gift funds for the entire down payment.
Bad credit
Credit score requirements to obtain a mortgage have been going up… it was 580, then went to 620 and now most are requiring 640 for an FHA loan. For a conventional loan you will usually need at least a 660. To get the lowest interest rate your score must be over 740.
High debt ratios
If bills eat up half of your monthly income, you probably cannot afford a mortgage payment on top of those other expenses. Ideally most FHA loans should have a housing ratio that is about 29-33% of your gross income, and your total debt to income including your house payment should be about 41-43% of your gross income.
Little job security
One of the biggest reasons homeowners go into foreclosure is because they lose their jobs. If you have any reason to believe your job may be in jeopardy, this isn't a good time to buy a home.
Expect to move in the next 3 years
Now more than ever, buying a home should be a long-term commitment. If you move around a lot you may find yourself taking a big loss. Most people buying now are expecting to stay put for at least 5-10 years.
Constant traveling
If you find yourself traveling much of the time, homeownership may not be the right choice for you. A condo may seem a good option because the association watches over the complex and handles things like maintenance, snow removal and lawn care… but if your association fees are high you may end up paying a lot for services and utilities you hardly ever use.
Uncertain longterm relationships
If you are buying a home with someone else (whether it be a friend, partner or spouse) and you are uncertain about the longevity of the relationship it may not be wise to buy a home together. If you are relying on that person's income and support to make the mortgage payments, what will you do if that person vanishes and you are left to make the payments on your own?
Sharlene Hensrud, RE/MAX Results - Email – Twin Cities Buyer's Agent
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