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Why Buying a Home is Not for Everyone

Why Buying a Home is Not for Everyone

| March 11, 2020
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Many think that it is the American dream to purchase a home with the white picket fence and an apple pie cooling off on the window sill but for many, a 30-year mortgage is not possible and simply does not make sense. Prior generations were not burdened with student loans and worked with one company for their entire life. The stability of one job makes the decision of going into debt for 15, 30 years an easier one.

The average millennial carries a large student loan debt balance. Even if someone wanted to purchase a home, the debt to income level requirement for most banks might be too high for the bank to take that loan on. The average student loan debt could be a down payment on a home. It has been said that to get ahead in the US service economy, you need a college degree so that you can get a high paying job. Millenials are suppose to change jobs very frequently in their lifetime. Could you imagine purchasing a home more than once because you had to change jobs? On the sale of a home the real estate agent gets a very large commision so when moving frequently you are just paying a real estate agent. With that amount of career changes it makes infinitely more sense to rent.

Many millenials that become home buyers end up regretting it. I think a lot of that is purchasing a home out of their price range. This is what helped cause the 2008 financial housing crisis when people purchased McMansions with 30 years mortgages that did not make sense and when they lost their job they had no wiggle room to make a mortgage payment. If you do purchase a home, my rule is that you need to be able to afford the 15-year mortgage payment. You then spread that loan out 30 years and make double payments. You can always shorten a loan with the bank but you can never extend it. If any massive life disrupters come up you can just half the payment. 

The facts I just laid out does not mean that buying is stupid for everyone. If you buy a home you should plan on keeping it for life. Buying a small home that can be converted into a rental property when you change jobs can be a good way to build equity in that house and possibly more depending on current rental rates and the home purchased. You would still have to rent but at least your home is building up equity. Purchasing a home is not a fairy tale event in your life. It requires extensive research of the housing market. The education of purcahsing a home in this country is disgusting and helped cause 2008. At 23 I was confident enough to purchase a property because I took 2 real estate classes, have a finance degree and have multiple securities licenses. Just because you watch HGTV does not mean you are ready to purchase a home. I worked with a younger real estate agent because I knew what I was looking for and did it almost all my self. I do not recommend doing that at all. Find an agent that has years of experience in the market you are looking for and never get "sold." Trust your agent and see as many homes as possible to get a better sense of the market. If looked through 22+ homes until I found the right one that made sense. You need to feel like you can live there but if the financials are not there you cant do it. Home repairs are no joke and if you do not have a handyman that you trust it can become problematic very quicly. 

If you are debt-free or with little debt there are multiple ways the bank will work with you to obtain a loan. If you are looking towards purcahsing a rental property or want to learn more about home purcahsing here are some recommendations on education material that made me more than comfortable when I purchased my Home. 

Bigger Pockets

Meet Kevin

Stephen Grahm

Local Real Estate Principles Class

Ben Mallah 

Youtube 

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Stephen Poll
Financial Advisor at Clay Financial
Stephen@ClayFinancial.com
(419)806-2986
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