Buying a home is a major decision. For most of us it is the largest financial transaction we have in our lifetime. Based on those comments it is easy to see why some potential buyers have a hard time pulling the trigger. Some questions they may be asking themselves include, can I afford this, what if I lose my job and cant make the payments and do I want this responsibility? After writing that, I feel like I should sell my house! But let take a look at the situation because I really dont think buying a home is risky. Rather than address some of the many benefits of home ownership such as the potential appreciation, tax benefits and the ability to customize and make it your place, I want to address the reasons some individuals do not buy. Can I afford to buy a home is not a fear it is a question that can be answered very easily at most banks and for sure by mortgage brokers and lenders. Most first time home buyers are pleasantly surprised to learn they can qualify and even more astonished by what price of home they can shop for. What if I lose my job and cant make a payment? Why is that so different from, what if I cant pay my rent? The renter who cant pay the rent is out on the street looking for another place to live long before homeowner is forced to move. Evicting a delinquent renter can happen in days depending on where you live. Ever try finding another place to rent after you have been evicted for not paying rent? Would you want to rent to that person, especially if they dont have a job? If you do find a new rental it will require a significant dollar deposit that if you had you would have used to pay the rent at the last place. As you can see this is not a very pretty scenario. Homeowners have some advantages when it comes to capacity to make payments. Landlords want to evict and get a new renter; lenders do not want to foreclose unless they have no other alternative. Lenders are more apt to work with a borrower who is having temporary financial problems because the foreclosure process is expensive and generally end up with some dollar amount being exposed to loss. Most lenders will not even start the foreclosure process until you are 60 to 90 days delinquent in your payments. In many places around the country and particularly in California where we have experienced rapid appreciation over the past five years, this time given by the lender allows the homeowner to find solutions including selling the home. Often the sale even results in the homeowner making a profit. Just because I have said the mortgage lenders are willing to work with delinquent borrowers, dont misread that as it will be a delightful experience and they are happy to roll over. It is not a fun experience and is generally a very expensive process but it does protect homeowners by providing time to seek solutions that renters dont have. So if buying a house can provide security why dont we all want to own a house? Do I want the responsibility of being a homeowner? There are some responsibilities and clearly expenses associated with home ownership that renters do not have. As long as individuals understand the risk factors this decision comes down to determining if the extra security and other benefits of owning your own home is worth the added responsibility. In California over the past few months there is another growing group of individuals who are not buying homes even though they have made decisions they want to be homeowners. The media Bubble proponents have many people wondering when the right time to buy is. After five years of record appreciation, will prices fall like some think? If you are buying a home for speculation reasons I think this is a good question and deserves some careful thought. On the other hand if you want to own a home for the security and other benefits this is the time to buy. |
