Buying a home is a life-altering choice that marks a major milestone in your life. In our society, some of the other major milestones in life include graduating from high school, getting married, and having children. When the wrong choices are made regarding such milestones, people can experience negative events such as financial ruin and divorces. Our mortgage advisors take the decision to buy a home very seriously, which is why we decided to write an article about the reasons you should not buy a home. We want you to live your life to the fullest by saving you from making a financial decision that could leave you in major debt.
You Cannot Make A Large Enough Down Payment
First of all, you certainly can purchase a home with a small down payment, but consider if it’s the right option for you. FHA mortgages can be obtained with a down payment as small as 3.5 percent, and you can acquire a conventional mortgage for as low as a 3 percent down payment. The downside to putting down such a small payment is that you will most likely have to purchase mortgage insurance. With mortgage insurance, you could be paying around one percent of your loan amount each year, so you will rack up additional expenses for years to come.
Additionally, when you have a smaller down payment, you will have to pay a higher monthly interest and principal payment each month on top of your mortgage insurance costs.
Your Future Is Uncertain
If you are in an unstable career situation or in an unstable marriage, then it’s best not to purchase a home. If you are single, is there a possibility that you will be married with children in a few years? You want to be able to live in a home that can accommodate your growing family. Some people experience wanderlust and move constantly, and purchasing a home would not be the best idea for them. The general rule of thumb is to not purchase a home if you will not be living in it for at least three years, but the longer you live in your home, the better.
You Have Bad Credit
Although you might be able to obtain a mortgage if you have bad credit, it may benefit you to withhold from purchasing a home. Many people with bad credit obtain FHA loans, but they include high mortgage premiums. For those of you with a FICO score under 620, you could acquire a conventional mortgage with high interest rates. We recommend that people suffering from bad credit to work on improving their credit scores before they purchase a home.
You Have High Amounts Of Debt
When you apply for mortgages, lenders will look mainly at your income and your other debts. If your debts include a major percentage of your total income, then you might want to reconsider buying a home. In order to purchase a home, you must keep your debt-to-income ratio as low as possible. The last thing you would want to do after buying a home is to max out your budget on a regular basis.
If you are unsure about whether or not you should buy a home, contact our mortgage brokers for a free prequalification. We can look at your expenses and discuss your life situation to see where you are at both personally and financially.