Can You Afford a Home?

For many people, their ultimate goal is to buy a home. They follow the yellow brick road with the first stop college, then marriage and then homeownership. It’s a predetermined path they take. Unfortunately, homeownership is not a good fit for everyone. 

The Down Payment

Chances are you saved money for a few years to come up with a sizable down payment. The only problem is that even though you parted with your nest egg in its entirety, it falls short of the 20 percent banks prefer. If you think about the average median home price of roughly $250,000.00, the down payment at 20 percent is $50,000.00. Most young newlyweds don’t have that kind of cash hanging around. Coming up with 10 percent is hard enough. The bank will still approve you for the mortgage loan. However, you can now add a few hundred extra to the monthly payment for private mortgage insurance (PMI). This additional fee will remain in effect until you pay off 20 percent of the mortgage.

Annual Fees Associated with Homeownership

There are other annual fees that come with owning a home. You’ll have property and school taxes that can be a few thousand or more than ten thousand per year depending on where you live. On top of that, there’s homeowner’s insurance which on its own can be a few thousand. Many lenders now include your taxes and homeowners insurance into your monthly mortgage payment. While the breakdown over 12 months does make the payments easier, you can expect to add several hundred or more to your mortgage payment.

Money for Repairs

Many younger couples opt for an older home due to their budget. They figure they can fix it up over time and even add amenities such as an outdoor barbecue with outdoor kitchen cabinets. While it may make it easier to get into a home, it leaves you at greater risk for home repairs. Plumbing and roofing beyond 20 years can end up costing you thousands in repairs. Unlike renting a home, where the landlord is responsible, you are the homeowner, so any repairs are made by you. 

Cash Poor Status

Now that you own a home, your life is complete. You can customize it the way you want, have parties and enjoy life. For many who get into a home borrowing cash from every source available, there is no extra money left over to enjoy living. They have a nice home, true, but all of their extra cash now goes to mortgages, taxes, homeowners insurance, and household bills. Before signing contracts for a home, make sure you consider every cost involved. Monthly household fees may include gas, electricity, water, and garbage removal fees. They can add up to more than a few hundred on top of your mortgage. 

Freedom to Move

Unless you have a secure job and are willing to live in the same place for more than a few years, owning a home may not be in your best interest. If you decide to move due to an amazing job offer, you must sell your home first or find a way to keep ownership but rent it out under management. Without any equity, you are at the mercy of the current housing market. If it’s a seller’s market you may break even. However, if it’s now a buyers’ market, you may end up losing money on the home.  

Owning a home is a huge undertaking. It’s probably the largest investment you’ll make in your lifetime. Aside from the down payment and monthly fees, you are responsible for maintaining it. The older the home, the more likely you’re going to have to shell out a few thousand within the first couple of years.