One definition of homeownership: the process of draining yourself of money due to home-maintenance costs.
Interest rates are low, the housing market remains hot(ish) and it’s home-buying season. Prospective homeowners all over America are licking their chops for a piece of the pie. For those folks who are going to complete the home-buying process without any savings left after closing, in the words of Chuck D., I say to you, “Welcome to the terror dome.”
“But Pete, I just got approved for a mortgage, and we didn’t even have much money to put down,” you retort. I know. You’re now making my point.
Getting approved for a mortgage isn’t the accomplishment it used to be. The subprime-lending meltdown of the mid-2000s taught us that. Don’t get mad at me for writing that. Just read “The Big Short” by Michael Lewis, or watch the movie.
There was once a time in which a mortgage approval was a rite of passage. It meant you had arrived. Now? It means some institution is willing to take a few payments from you.
Don’t exhale upon closing on your new house, as though you had just finished a marathon. It might feel like you did, but in reality, there should be a guy standing there in a funny hat telling you the race is actually 100 miles longer.
When you own a home, you own its problems, too. The roof is your problem. The furnace is your problem. And the thousands of other structural components and functional contents are your problems, too.
For some ridiculous reason, my home has two faux chimneys. They are both leaking. Do you know what my call was like to the repair company? “Hi, I need my fake chimneys repaired.” Two pointless fixtures are costing me thousands of dollars. I’m frustrated, but if I didn’t have an emergency fund, I’d be in trouble, in spite of my ability to afford my mortgage payment.
Being able to afford the monthly mortgage payment is not indicative of your ability to afford homeownership. Just because a billion-dollar financial institution lets you do this to yourself, it doesn’t mean you should. (See also: not spending four hours at an all-you-can-eat buffet.)
If someone asks me whether or not they can afford to be a homeowner, I ask two simple questions: How much of a down payment do you have? How much of an emergency fund will you have after the down payment?
I can map your financial future from there. I don’t need a crystal ball, Ouija board or time machine. If you don’t have a down payment, which you saved organically on your own, without assistance or borrowing, how are you going to afford the furnishings, landscaping and planned obsolescence of household appliances?
You aren’t. You will go into debt. And then, you’ll be even less stable. Or you can choose to not address important maintenance issues, which, of course, leads to bigger problems down the road, especially when you finally sell your home. There’s nothing quite like being told you need $10,000 in repairs to prepare your home for someone else to live in.
Down payments can arrive on the scene in several different incarnations. I’ve seen several folks borrow from their 401(k) in order to buy a house. That particular move usually makes me physically ill. Some people receive a loan/gift from family members to place the seemingly last piece in the puzzle. If you have to finagle your financial life around to summon a down payment, then you can’t afford homeownership. You aren’t tricking the bank. You’re tricking yourself.
I fully acknowledge my assertion would crash the economy. If people only bought items they could objectively afford, our economy would crash faster than I would on a unicycle.
The entire subprime-lending complex was designed to grow the market of borrowers. “Let’s extend credit to those folks who we shouldn’t objectively lend money to,” I’m guessing the softball team’s jersey’s read. It’s a gut-wrenching feeling to know that if Americans stood up for themselves and made good decisions, our economy would be destroyed.
Homeownership only solves financial problems for those who can objectively afford it. When executed properly, homeownership will help you eliminate a major living expense, upon paying off the mortgage. Renting can’t do that. You can never eliminate the expenses associated with renting.
One of the primary arguments against renting is the rising cost of rent. That’s a tremendously valid point, but when my rental property’s air conditioner goes on the fritz, I’m the one that sweats, while my renter gets to pump his fist in a new, especially cool environment.
I want you to be a homeowner, when you can objectively afford to be a homeowner. I don’t want you to find yourself caught up in a societal tidal wave which blindly delivers you into financial hardship. There are tons of reasons why homeownership is great. I’m just not interested in exploring them today.
You’ve seen the billboards along the highway which boldly announce “You could own a home for what you pay in rent.” I often daydream that a windstorm destroys them in one fell swoop. But then I remember my home could be damaged by the same storm and then I’d have to pay for the damage.
Contact links David Mead Freelancer for Structural/Civil Engineering projects Upwork - Click HERE FIVERR -Click HERE You can see my projects on youtube or on my Google Drive account Google Drive Youtube