We often associate springtime with cleaning house, but actually, it's generally a good time to buy a house. Property listings tend to spike right around this time of the year, which means buyers are more likely to have their pick of inventory. But buying a home is a major investment, and one you may not be quite ready for. Here, in fact, are a few reasons to hold off on becoming a homeowner and continue renting a bit longer.
1. You don't have a 20% down payment
Putting down 20% of your home's purchase price will help you avoid private mortgage insurance, or PMI. PMI is typically equal to 0.5% to 1% of your mortgage value, so if you're getting a $400,000 loan, that's an extra $2,000 to $4,000 a year you'll need to pay on top of your regular mortgage payment. In many cases, you're better off waiting until you've saved that 20% down payment to move forward with buying. Plus, think about it this way: The less you put down, the longer it'll take to build equity in your property.
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2. You don't have job security
Owning a home means doing more than just making your monthly mortgage payments; it also means keeping up with maintenance costs, repairs, property taxes, and insurance. Therefore, if your job isn't stable and you have reason to suspect you might be out of work in the near future, that's reason enough to hold off on buying and continue renting instead. When you rent, you're only liable for the monthly payment spelled out in your lease, which is a much safer prospect than taking on a host of unknowns when your work situation is dicey.
3. You're expanding your family
Adding a child to your family entails a host of expenses, from diapers to clothing to medical care. It also means that you (or your spouse, if you're married) might choose to take some time off from work to raise that child, thereby slashing your household income. Therefore, it sometimes pays to hold off on buying a home until you have that child and see how things play out. Remember, you might think you'll have no problem going back to work after a baby, but your emotions, coupled with the outrageous cost of child care, might get the better of you -- so better not to be stuck with an extra expense at a time when your life is already so full of change.
4. You have no retirement funds
Though pretty much all financial experts agree that you shouldn't buy a home until you have a reasonable emergency fund established, many workers purchase property before opening retirement accounts. But that could end up being a mistake. The longer you wait to fund an IRA or 401(k), the more you lose out on the power of compounded returns, which could stunt your savings' growth tremendously. So you may be better off kick-starting that nest egg and then using your spare cash for a down payments.
5. You may not need the tax breaks
One reason why homeownership is so appealing is that it comes with a host of lucrative tax breaks. But you might lose out on some of those benefits thanks to changes in the tax code that were implemented earlier this year. For example, it used to be the case that you could write off property taxes in any amount. Now, the state and local tax deduction, which includes property taxes, is capped at $10,000. In states with high real estate taxes, that's not much of a bargain. Furthermore, since the new tax laws have virtually doubled the standard deduction, it may not make sense for folks who used to itemize to continue doing so. And if you don't itemize, you don't get to claim those homeowner tax breaks in the fist place.
Let's be clear: There are plenty of benefits to buying a home, and if you're prepared financially and in a good place job-wise, there's nothing wrong with taking the plunge. On the other hand, if any of the above circumstances apply to you, it could be a sign that you're better off waiting on homeownership until your finances improve or things settle down at home or on the job.
Finally, if you're aiming to buy a home for the sole purpose of capitalizing on tax breaks, you may want to rethink that plan. There are plenty of other ways to save money on your taxes without having to take on the expense that is purchasing and maintaining a home.
