Here Are the Best and Worst Reasons to Buy a Home

Buying a home is something on many people's bucket list. In fact, purchasing a home has long been considered to be a part of the American dream.

But, a home is also a huge financial commitment. It requires you to get a mortgage loan, which means you will end up committing to paying that back with interest for a long time. And homeownership can come with other added costs beyond the mortgage payment that can do a number on your bank account, such as maintenance expenses and property taxes.

There are both good and bad reasons to take on the commitment that homeownership entails, and you need to make sure you're acting with the right motivation before you buy. Here are some of the best and worst reasons to move forward with becoming a homeowner.

Best: Because you're in a good financial position and are ready to set down roots

The single best reason to buy a house is because you want to buy a place you will stay in permanently and make your own and you are financially prepared for all that entails.

To be financially ready for homeownership, you should ideally have a 20% down payment. With the median sale price of homes coming in at $436,800 in the first quarter of 2023, this would mean you'd need to have about $87,360 saved. If you can't meet that milestone, aim to save at least 10% so you have a broad choice of lenders -- but know you will have to pay for private mortgage insurance to protect the lender when you put less than 20% down.

You'll also want to make sure you have several months worth of living expenses saved up in an emergency fund so you can keep paying your mortgage for a while even in the event of a job loss or job interruption due to illness or family issues. And, you'll want a good credit score so you can qualify for an affordable rate.

By making sure you're financially ready, you can avoid having your home become an obstacle to financial security. And, by making sure you're ready to stay put, you can avoid getting into a situation where you have to sell quickly and incur high transaction costs -- not to mention the stress of waiting for a buyer.

If you want to build a lasting home for yourself and your loved ones and you have the money to do so without jeopardizing your finances, then this is the best reason for a home purchase.

Worst: Because you feel pressure to purchase a home

There are actually two really bad reasons to buy a home. The first is because you feel pressure to do so.

Homeownership is often described as part of the American dream and you'll probably hear people say you shouldn't "waste money" on rent. But, homeownership doesn't necessarily have to be part of your dream if you don't enjoy owning and maintaining a property. And you aren't necessarily wasting money on rent if you're paying for a place to live -- especially if you can rent for cheaper than you could buy a comparable property and can invest the difference.

Don't let anyone else pressure you to make a major lifestyle and financial commitment like purchasing a house.

Worst: Because you think you're going to make a ton of money on your property

Finally, another bad reason to buy is because you anticipate making a ton of money on the resale of a home. There's no guarantee you will always see your real estate appreciate substantially and even if your home does go up in value, you'd have to sell it to realize the gains -- and then likely buy another place to live, which could eat into your profits. There are also high transaction costs with both owning and selling a home, including property taxes, insurance, maintenance costs, and real estate agent fees.

You should buy a home to live in for the right reasons, not the wrong ones -- so be sure to consider your motivation before moving forward with one of the biggest purchases of your life.