It's the American dream: For hundreds of years, Americans have sought to own their own homes. To many, the home ownership rate is a sign of the country's economic and even overall health. Some lament the lower home ownership rate among younger people, and Americans of all ages still dream of owning a place of their own.
Maybe you're ready to buy a home yourself - or maybe you're not. Even if you can afford to, should you? Let's take a closer look at buying houses in today's real estate market.
Saving up for your home purchase
There's a healthy debate over whether or not buying a home makes more sense than renting (more on that later). But that debate is irrelevant unless you have enough cash to buy your home!
Saving up to buy a house is no easy task. You'll have to work hard and save carefully. You'll also have to make sure that your home purchase won't put all of your financial eggs in one proverbial basket: A healthy financial future for you will include an emergency fund (most Americans can't afford even relatively small sudden expenses - don't let this be you!) and retirement savings. Remember, houses are very illiquid (meaning they're tough to sell fast, though we'll talk about that later, too), so you need to make sure that you're not spending every dime that you own on your down payment. What if you lose your job or need to pay for a hospital visit? And how will you retire if you have a big house and no cash? Be smart, and be conservative when assessing whether you should buy and how much house you can afford.
Why buying a home makes sense
Even if you can buy a home, should you?
Well, that all depends. The renting versus buying debate is endless and entrenched. You likely already know the arguments: Buying a home means swapping a monthly rent payment (which goes into your landlord's pocket and is charged every month forever) for a monthly mortgage payment (which gives you more equity in your valuable home and, eventually, will lead to you owning your home free and clear and no longer having to pay every month). But a rental allows you to save that huge down payment that you'd need for a home, plus the big closing costs and all of the costs of maintaining a home that your landlord takes care of in a rental situation (maybe you could invest that money and earn enough to outweigh the financial advantages of home ownership).
In the end, the debate is kind of useless: Whether or not it makes sense to buy a home depends on a few key factors.
First, and perhaps most important, is how long you plan to stick around. Closing costs are a doozy, and they can outweigh the benefits of paying a mortgage instead of rent in the short term. Move within a few years, and you may have been better off renting (and skipping the closing costs); stick around for a decade, and renting may be the clearly inferior deal.
Your area matters, too. Buying a home is out of the financial question for some in places like New York City and San Francisco. And what about the local real estate market? If it's on the upswing, that's a case for buying.
Remedying issues with home ownership
Buying a home is often the better choice, but things can sometimes go wrong. We talked before about how homes are highly illiquid. Even if you're relatively conservative about your home purchase, it is possible for your circumstances to change so dramatically that you are forced to sell you home as quickly as possible - and that's hard to do. You may also need to move your home quickly if you're on the go for a new job and don't want to leave it on the market, or if you're just interested in getting some cash out of your property so that you can move on an opportunity.
But there are options here. Some companies specialize in buying homes fast, giving you the cash that you need to stay afloat or to seize a big opportunity, explain the pros at Sell Quick California, which is just such a company. You may also be able to restructure your home loan. If you're in a real jam, consider speaking to a financial advisor about your options. And if you're not in a jam yet and haven't yet bought your home, consider this a hypothetical with an important lesson to teach: Be smart, be conservative, and double-check your math before you commit to buying something as expensive as a home!
