How not to buy a problem house? You might want to buy a house, but there are many factors to consider before you know if you’re actually ready for such a big step.
Since the housing bubble burst and prices dropped, you hear a lot of people saying that it’s a great time to buy a house. For some that may be true: Interest rates are low, and there are some great bargains on the market. Housing prices and interest rates aren’t the only factors when you’re considering homeownership, though, and there are times when renting is still the best option.
Even with lower home prices, there are a lot of responsibilities and additional expenses that go along with homeownership. From paying for maintenance to maintaining your ability to move, there’s more to consider than just that mortgage payment.
Let’s look at some of the reasons why you might not want to buy a house.
Previous Maintenance - If you're not an expert, you may not know what makes a foundation unsafe or how leaky that roof will be in a downpour. How well have the previous owners cared for the house? Before you purchase a home, it's important to have a trustworthy home inspector come out and take a look at the shape it's in. A home inspector can tell you how long that roof is going to last and estimate when you'll need to do other costly repairs, like replace the hot water heater or overhaul the HVAC. Keep in mind that what seems like an affordable home can become less affordable if you have to make these large repairs within a few years of purchasing.
Job Stability - Do you like your current job? How long have you been there? Are you confident that your position is stable, and are you expecting annual raises and bonuses? Of course, you can never be 100 percent certain that your job is secure, but when you're looking into buying a home, it's a good idea to take an honest look at your workplace's climate. Have there been rounds of layoffs? Have you heard of more? It's much easier to break a lease if you suddenly can't afford it than it is to sell your home. If you feel like your current job situation is iffy, you may want to hold off a few years on such an important purchase.
The Neighborhood - Don't forget to consider the future when looking at new homes. Buying a home is an investment, and you want to make sure that you're going to be able to sell that house someday. Look at the neighborhood you're considering and think about that neighborhood's long-term viability. Are comparable houses in the area selling for more or less? Is the city planning a construction project that could hurt your home's value down the road? A little research goes a long way, and you just might find that the property isn't the good investment that it seemed at first. You may want to wait a couple of years while you research the area.
Caring for a Home - When you're renting and the pipes burst, you can call your landlord, and a maintenance person will come out to fix it. As a homeowner, you're your own landlord, and all of those little hiccups become your problem. It's your responsibility to maintain the lawn, fix things that break (or pay a handyman) and keep up with aesthetic maintenance, like painting the porch and shoveling the driveway when it snows. Are you ready to take on the time and expense involved in maintaining a home? If you're not prepared to care for your property, it might not be time to buy a house.
Down Payment - It's a bit harder to borrow a down payment since the housing bubble burst, but it's still possible to buy without having that cash on hand. If you can't make the down payment on your own, however, now is probably not the best time for you to purchase that house. An additional loan or private mortgage insurance (PMI) means higher monthly payments, and that second loan that you're looking at as a down payment probably has a much higher interest rate than a 15- or 30-year fixed mortgage. You're probably better off focusing on saving up enough for a down payment before you take the home-buying plunge.
Local Schools - If you have a family with children, or if you're planning on starting one in your new home, schools should be a high priority. Even if you're not planning to have kids, it's a good idea to check out the area schools. You may change your mind down the road, and you don't want to be stuck with bad school choices. Research all the local districts, and look at neighborhoods with the highest-rated schools. School districts can make a big difference when you're getting ready to sell, as well. Homebuyers often look at the neighborhood's schools when choosing a house, and living in a bad district can affect your home's value or make it harder to sell when the time comes.
Rent vs. Own - If you're currently renting an apartment or home, you may be eager to purchase your own space. Don't move too quickly, though! Look at how much rentals are going for in the area in which you're thinking about buying, and compare prices. When researching home prices, it might seem a little counterintuitive to look into rental costs, but this is definitely something to consider. Compare average rent prices in the area with your total monthly payment, including taxes and insurance. If owning a house costs 35 percent more than renting, it might not be a good time to buy in that particular neighborhood.
Credit Score - You may be tired of seeing commercials and ads telling you to check your credit score, but they have a point -- knowing your score is vital when considering a purchase as important as a home. A low credit score can make it hard to get a loan, and even if you do obtain a loan, bad credit might affect your interest rate. If your credit score is below 700, it's probably not a good time for you to buy. Instead, why not look for a cheap rental to live in while you pay down debts and get your credit shored up? If you work hard, you may be ready to buy your own home within a couple of years.
Staying Put - Are you the type to put down roots, or do you get restless after a few years in one place? When you're renting, it's pretty easy to pick up and move. Just wait for your lease to end, load up the U-Haul and hit the road. Homeownership makes relocating a little bit trickier, though. There's no way to know how long it will take you to sell your home, and if you want to move soon, selling a house from another city or state can be incredibly stressful. If you're not planning to stay in one place for at least a few years, it may be a better idea to rent until you're more certain of your plans.
Must Haves - Don't forget: A house is probably the biggest purchase you'll ever make, and you don't want to end up in a home you're not happy with. Money issues aside, there are plenty of other things to consider. Often, it's easy in the midst of house hunting to lose sight of what you want. Before you start, make a list of must-haves, and don't settle! Is it important to you to live within walking distance of public transportation? Would you be miserable with a tiny kitchen? If you can't afford a home that either accommodates your list or that you could renovate easily, then it's not the home for you.