Your monthly rent seems dirt-cheap by comparison.
Fretting too much over job security
Being insecure about your job is natural. Most people are — even corporate executives, superstar athletes, and movie stars. And buying a home seems like such a permanent thing to do. Job-loss fears can easily make you feel a financial noose tightening around your neck when you sit down to sign a contract to purchase a home.
Although a few people have real reasons to worry about losing their jobs, the reality is that the vast majority of people shouldn’t worry about job loss. We don’t mean to say that you can’t lose your job — almost anyone can, in reality. Just remember that within a reasonable time, your skills and abilities will allow you to land back on your feet in a new, comparable position. We’re not career experts, but we’ve witnessed many folks bounce back in just this way.
Buying when you expect to move soon
People move for many reasons other than job loss. You may want to move soon to advance your career, to be nearer to (or farther from!) relatives, to try living somewhere new, or just to get away from someplace old.
Unless you’re planning to hold onto your home and convert it to a rental when you move, buying a home rarely makes sound financial sense when you expect to move within three years. Ideally, stay put for at least five years.
Succumbing to pushy salespeople
When you buy a house, you’re the one who’ll be coming home to it day after day — and you’re the one on the hook for all the expenses. Don’t ever forget these facts when you plunge into the thick of possibly purchasing a home. If you have lingering doubts about buying a home, apply the brakes.
Ignoring logistics
Sometimes, when looking at homes, you can lose your perspective on big-picture issues. After months of searching, Frederick finally found a home that met his needs for both space and cost. He bought the home and moved in on a Saturday. Come Monday morning, Frederick hopped in his car and spent the next hour commuting. At the end of his workday, it was the same thing coming home. He was tired and grumpy when he arrived home Monday evening, and after making dinner for himself, he soon had to hit the hay to rise early enough to do it all over again on Tuesday.
Initially, Frederick hoped that the trying traffic was an aberration that would go away — but no such luck. In fact, on many days, his commute was worse than an hour each way. Frederick grew to hate his commute, his job, and his new home.
Overbuying
Many first-time home buyers discover that their desires outstrip their budgets. Nelson and his wife, Laura, had good jobs and together made in excess of $150,000 per year. They got used to buying what they desired — they ate at fancy restaurants, took luxury vacations, and otherwise indulged themselves.
When it came time to purchase a home, they spent the maximum amount and borrowed the maximum amount that the mortgage person told them they could. After the home purchase, Laura got pregnant and eventually left her job to spend more time at home. With the high homeownership expenses, kid costs, and reduced household income, Nelson and Laura soon found themselves struggling to pay their monthly bills and started accumulating significant credit-card debts. Ultimately, they ended up filing bankruptcy.
Underbuying
Remember in the story Goldilocks and the Three Bears how Goldilocks had difficulty finding porridge to her liking? In one case, it was too cold, and in another, too hot. Well, just as you can overbuy when selecting a home, you can underbuy. That’s what Nathan and Rebecca did when they bought their first home. They believed in living within their means — a good thing — but they took it to an extreme.
Nathan and Rebecca bought a home whose cost was far below the maximum amount they could have afforded. They borrowed $70,000 when they could have afforded to borrow three times that amount. They knew when they bought the home that they’d want to move to a bigger house within just a few years. Although this made the real estate agents and lenders happy, all the costs of buying and then selling soon after gobbled a huge chunk of Nathan and Rebecca’s original down payment.
Buying because it’s a grown-up thing to do
Peer pressure can be subtle or explicit. Some people even impose pressure on themselves. Buying a home is a major milestone
