Should I Buy a House?

3 Questions to Which You Must Answer "Yes" Before Purchasing a Home

God has designed us to be conduits through which his generosity flows. Therefore, we should carefully consider our financial decisions. One of the big decisions you will face is whether or not to buy a home. For many, they perceive homeownership as a right of passage into adulthood. It is not. It is a good decision for some, but not for others. Homeownership should only occur only when it makes financial sense. How do you know when you are ready? Let me give you three questions to which you must answer “yes” before purchasing a home. When searching for a home use NOKK, where you can view different homes and talk to the seller. Do you plan on living there for at least 5 years? Any possible financial gain from owning a home can be destroyed in an early move. The purchase of a home comes with several upfront costs. Overcoming these costs takes time. Additionally, most of your mortgage payments are going toward interest in the early years. Needless to say, there is not much gained in the first few years. The financial benefit of homeownership comes with time. If you are planning to move within 5 years, stick to renting.

  1. Will your mortgage payments be less that 30% of your after-tax pay? Do not place yourself in a position where you are house poor, where all your money goes to pay the mortgage. Give your finances the flexibility for you to live a life of generosity. If your after-tax pay is $6,000 per month, I recommend that your mortgage payment should not be any greater than $1,800 ($6,000 x .30).
  1. Do you have at least 20% for a down payment? If your mortgage is more than 80% of your home’s value, you could get slapped with private mortgage insurance (PMI). This is an additional monthly fee lenders charge because you are considered a higher-risk borrower. PMI is to protect the lender not the borrower. That’s right. They think the way you are borrowing is risky. Take note. PMI cost you between .3% and 1.5% of your original loan balance every year. Don’t be considered a risky borrower and put yourself in the position where you have to pay PMI.

If you can answer yes to these three questions, you might be ready for homeownership. But don’t forget to consider all the other costs associated with owning a home. Remember, it will be your home. No more landlords to call when the hot water heater breaks and floods your house. You go to website to find repair specialists and you have to pay for it. And, yes, I know this from experience.

Steward your resources wisely. Don’t purchase too much or too soon. Make the wisest financial decision possible so you can be as generous as possible.

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11 thoughts on “Should I Buy a House?

  1. Another great financial article. I wish I knew more of this when I first moved to Wake Forest area and had some idea how long I would be here. Now I have a better understanding of how to determine if you should buy or rent.

  2. Another thought for beginning homebuyers is to start with less (and smaller)than you can initially afford, and sock away extra money to add to a down payment on a nicer house later. That’s a good way to avoid the PMI (but if you do have PMI, watch your mortgage balance, and ask that the PMI be removed when you’ve paid off 20% of the loan – a good way to pay it down quicker is to add money to each monthly payment to be put toward the principal – that can knock off loads of interest in the beginning of the loan). And funds for purchasing a home maintenance/warranty policy at around $500 a year should be a given; for a modest service call fee, any appliances and systems (think plumbing, dishwasher, HVAC, fridge, washer/dryer) that break down will be repaired or replaced.

  3. These are good financial considerations, Art. What about the spiritual considerations. Couldn’t it be that you meet all the financial considerations and God is still saying “wait,” “not here” or “not my plan for you.”

    • Thanks, Kevin! And good question. Of course, given what the Bible says about money, I classify financial/stewardship considerations as spiritual considerations. And I believe that God would not compel someone to make a poor stewardship decision, whether it is purchasing or renting. Hence the 3 guidelines to help gauge whether one’s desire of homeownership aligns with their financial reality (whether or not it is a good stewardship decision). And I know you believe all this as well.

      Whether someone feels compelled to rent or purchase, they need to filter it through the lens of stewardship. And, yes, there are reasons why it is better stewardship to rent as opposed to purchase, including being unsettled as to whether or not you can/should stay in a particular home for more than 5 years. God may have something else planned for you.

      Always good to hear from you!

  4. You kind of pass over question 3 like its no big deal. Not everybody, especially kids just starting out, have 20% down. PMI ENABLES those with less than 20% down to purchase a home. Underwriting guidelines have tightened considerably since 2008 so kids starting out can’t buy unreasonable homes like before. Sure, it’s an added cost, but it is deductible and something that those that don’t have 20% should consider. It’s not just “slapped on” as you stated, without their total knowledge. Don’t let an apparently bad situation you had totally taint the possibilities for an excited, potential first home buyer.

    • Thank you, Michael for your comment. I think my post on the concerns of PMI may help. You can check it out here – http://bit.ly/1XzZUeI. As you will see in that post, just because you can buy a home doesn’t mean you always should. 2008 taught us this. And regarding the “slapped” statement, I never said it was without their knowledge.

      I hope this helps,

      Art