Not everybody should own a home! - Kansas City Real Estate

Client asks, “Martin, when should I consider buying a home, instead of staying with my apartment?”



Loaded question.  Last time I hit this topic, the hatemail spilled out of my email inbox.

Words you will hear few real estate agents, but will hear from many REALTORS: Not everybody should own a home!

Some people aren't cut out for home ownership, for a variety of reasons. Are you one of those who should rent and not buy? Here are some ways to tell.

Does your credit report tank? If your FICO score is below 620, you're not going to receive a good interest rate for a loan and, in fact, that kind of score could dump you into the hands of a predatory lender.  Call me, let’s discuss.

High Debt Ratios

Lenders consider two ratios: front-end and back-end. The front-end is your mortgage payment, plus taxes and insurance divided by your monthly salary. The back-end adds your monthly debt payments to your PITI payment before dividing that total figure by your salary. A 50% debt ratio is a high ratio. A high debt ratio means you may not qualify for the loan.

Even if you find a hairball lender that is willing to fund such a loan, you may not be able to afford to feed yourself, even if you eat dirt!

Is Your Job in Jeopardy or Maybe You’re Relocating Soon?

Is your company laying off? Could you be fired and, if so, how hard would it be to get another job right away? Unemployment compensation is rarely enough to cover mortgage payments. Are you thinking of relocating?

Yes, some people want to buy under these conditions, thinking the home could be rented i=n the event they move.  Not a bad thought, but that may radically change the type and style of home you consider, and would definitely change its location.

Maintenance Issues

All homes require upkeep and maintenance. Not everybody has the where-with-all, much less the desire, to tackle home repair projects. In addition, many first-time home buyers can not afford to hire a professional to fix things that break. Experts suggest you set aside 5% of the purchase price to cover maintenance and repairs when you buy a home.

Let’s face it DIY fans, it takes longer than the 30 minutes television segment to tile a bathroom or remodel a kitchen.

When Renting Costs Considerably Less

If your mortgage payment would be triple the amount (or more) you would pay for rent, it might not make financial sense for you to buy. For example, if it would cost you $2,000 a month to rent what would cost you $6,000 per month to own, does it make sense to pay $48,000 a year more to own a home?

If you are in a 30% tax bracket, you might not come close to recouping the difference you paid. Say your deductible expenses are $5,000 a month; 30% of that is only $1,500, which would be your true tax savings per month. Would you spend $6,000 to save $1,500? For more information, please consult a tax accountant or CPA.

The smart move is to speak with an expert who is willing to tell you buying a home may be a bad idea.

Should we talk?

RE/MAX sells more homes than any other real estate company.

For a reason...should we talk?

Let us know what you think or add to our blog by writing a comment. Do you have a real estate question for the Real Estate Wizards? Email us at RealEstateWizard@DowellTaggart.com

Blog post written by the Dowell Taggart Team of RE/MAX Best Associates

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