Should You Buy a House?

Written by Travis Carter : Knowledge Center

When faced with the

proposition of “settling down” or commitment to a career, often one of the first steps is to find a home. Not just another house but some place to call home. Houses are everywhere but a home defines comfort. It matches the commitments you make in your life. Whether that be family, career, children, or even education. The financial considerations are sometime secondary to emotion.

Is Buying a House Right For You?

First ask yourself, am I prepared to make a long term commitment to turn this house into a home. Buying a house , although it may seem complex, is rather simple compared to the responsibility to turn that house into a home. Maintenance, taxes, and insurance are just some of the additional considerations that need to be comfronted.

The Additional Costs

When budgeting for home ownership, consider the responsibilities. Are you prepared to take care of the lawn and make.minor repairs? Are you prepared to save additional money to handle those surprises every house has. The hot water heater may need replacing or the roof may need to be replaced. Cosmetic improvements are a luxary but never forget the necessity of heat, four strong walls, and a roof. The carpet can wait. In a 24/7 world of social media and HGTV it is easy to get caught up in the dream of magnificent living quarters. You need to know that a home takes work and yet with all of the work a home is still the greatest investment you can make.

Why a House is a Good Investment

The answer can be summed up in one sentence. As the world changes around you, your mortgage will not. Of course this assumes you have locked in to a fixed rate mortgage.

Inflation is the term used for increased costs as the dollar decreases in value. I am sure you have heard you parents say something like, “I remember when a gallon of milk was a dollar fifty”. There is truth to that statement and it runs much deeper than a gallon of milk. In the 1970’s a newly constructed home would average $39,500. Compare that to the steep price of $300,000 or more today. The opposition to the lower cost was also lower wages. During the 70’s a good annual salary was $15,000. This may not seem like much now but comparatively speaking the income seemed acceptable given the costs of the time.

Now place yourselves in the shoes of a struggling new home owner in 1975. Maybe that $39,500 seemed almost too much to pay but they pulled the trigger anyway. After all, they were just married and expect a little one soon. They had fears and worries just like you. Every year that fear slipped away more and more.

The reason? …….Inflation.

As the cost of homes increased, the value of their home also increased. Soon that home was worth seventy thousand dollars but something else happened. Income rose. Inflation can work as a positive if you consider wage growth. Now in 1986, that same family earned a whopping $30,000 a year. The result? This family had a mortgage payment based on thirty nine thousand, a house worth $70,000, and their income had more than doubled. You see a home is what builds wealth. With assets and family alike.

Next time you consider purchasing a home make sure you are thinking about tomorrow, not just today. I am sure if that family had not purchased a home in 1975, they would have some feelings of regret by the 80’s. Interest rates and inventory are low. Will you have the same opportunity tomorrow?

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Inflation

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Budgeting for a Home

Before you decide to purchase a home sit down and complete a detailed budget of your expenses. In a column beside your current expenses, enter an estimate for a new home. By knowing how much you spend you will know how much you can afford.

Budget Checklist

It is important to know that this exercise is not meant to give you a precise calculation for a new home. You do not even know what the price is yet! This exercise is intended to be thought provoking. Thinking about these items will remind you to look into different aspects of a home you might be interested in purchasing.

It Will Be More Expensive

Your home is going to be more expensive than you think…. and it is supposed to be. This is your house. Not a car or an RV but your home. In most households, 30% of the income goes towards the home.

This may sound scary and intimidating but these are the sacrafices we make when we want to own a home. And the best part about investing in your home? It keeps or increases in value. The money you spend on car payments will always end up in a junk yard someday but a home….. That is forever.

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