Some people rent by choice; nothing wrong with that. In fact, those people understand the complexities involved in buying a house and lot. On the other hand, some people dreamed of becoming a homeowner someday. There is nothing wrong with this either. Question: How do you know that you are 100% ready to own your dream house and lot? How committed are you?
You may be financially prepared but not emotionally ready. Listed below are compelling reasons not to dive into home shopping yet.
Reasons not to buy a house and lot now
1) You plan to move elsewhere
About two to three years from now, you expect to relocate to another city to get the job that you always wanted, offshore. It means you are better off renting than owning an abode. The rule of thumb is if you’re going to maximize the money you spent on buying a house, you should live there for at least five years. While at it also, the transition to leaving your old job for a newer one somewhere else may leave you financially vulnerable. So, don’t buy it for now. The same stance applies if job stability and security are questionable at this point. Looking at it from a different perspective, the house may limit your flexibility.
2) You have debts
When it comes to owning a home, you have options such as obtaining a loan from the banking institutions. However, one important requirement is a good credit score. You may have a high credit score, but the overall capacity to pay is what the banks are after. This is calculated using the debt-to-income ratio; the lower the ratio, the better. In layman’s term, it means debt payment including the supposed monthly mortgage should be only 3% of your gross monthly income. Otherwise, it’d be a life of financial struggle. So, a big no.
3) You have spending issues
How adept you are at financial management should figure into your decision whether to own a house now or not yet. If you cannot hold off buying those expensive bags or shoes or travel to premium destinations often, then you cannot be a homeowner yet. Address your spending habits first before you decide whether a big purchase such as a house is for you or not. Can you afford to let go of some of these luxuries? Answer the question honestly, and you’d know the right decision. Well, at least, for now. Know that it would be harder to manage cash flow when you become a homeowner.
4) You don’t have savings
Good for you if you are making enough money to cover expenses, debts, and savings. If not, it means crunching the numbers first to determine if you can devote a decent amount to savings. You will need money for the down payment. If this is a struggle early in the home-owning process, how can you expect to cover the monthly payments? Not to mention, the emergency repairs in the years to come. A surprise expense may put you in debt further. On the other end, settling debts while building savings can be a challenge. It is highly doable, though, again: if you are earning more than enough money you can devote to these tasks. If not, take it one step at a time. Pay the debts first then, save, save, save.
5) You feel pressured
Our family, especially the folks, and friends have their expectations. At times, owning a home in Makati City or other prime addresses in the country is the gauge of how well-off you have become. However, it is an emotional trap wherein everybody expects you to “settle down.” If this is the only reason, you have that’s why you are looking into home listings, stop. It won’t do you any good. There is no life formula to this, so you should not succumb to unrealistic expectations of the people around you.
6) You are indecisive
For some who have already paid their debts and saved for the down payment and other homeownership-related expenses, indecisiveness can be the biggest hurdle. Financial readiness? Check. Emotional readiness? No. You want to settle down in this neighborhood, but you cannot seem to shake the idea of living in the city next to your BFFs. You want this duplex, but at the back of your mind, this apartment is the perfect dwelling place for you given your need for space. It only means one thing: you are not ready! So, let it go.
Buying a house before you are 100% ready has its financial consequences. You can be house poor in the end when you struggle to meet the monthly repayments on top of your household and other expenses. With this said, buy a house and lot for the right reasons. If you happen to be in any of the situation mentioned above, it is best to delay your plans of becoming a homeowner until you know you are 101% ready financially and emotionally.