home ownership

Thanks, But I’d Rather Not Be House Poor

I am not a home owner.  I shouldn’t be a home owner.  I don’t have enough cash in my savings account to be a home owner.

However, everyday I am pestered by people who just love to tell me that I need to buy a house.  They say I am crazy for not buying a house because of these things:

  • $8,000 Tax Credit
  • Buyer’s market
  • Good investment
  • Renting = wasting money

While all of these things may be true, home ownership is not a right – it’s a responsibility and a privilege.

In my article at Money Under 30 this week, I mentioned that buying a house simply to obtain a tax credit is just ludicrous.  Do you know how many tax credits exist?  Many.  There are tax credits for adopting a child, having a child, going back to school, being elderly or disabled, among other things.

Does that mean I should adopt a child or get all jazzed up about turning 65 so that I can claim a tax credit?  Er, no.  Nor should I jump for joy over a measly $8,000 tax credit which would in turn force me to buy a house before I’m ready;  Thereby, most likely putting me in thousands of dollars of consumer debt.  No thanks.

I think there are certain things you need to accomplish before you are ready to own a home.  Among them are:

  1. 6-12 months of Emergency Fund (I have about 10 months)
  2. At least 20% of the down payment in cash for your house (preferably more)
  3. Several thousand dollars ($15,000 for Lloyd and I) for new home miscellaneous expenditures
  4. Maturity
  5. Stable Full Time Job
  6. Married or buying a house on your own (never buy a house with someone other than your spouse)

From that list, I only have 2 (maybe 3, the jury’s still out on number 4) of those things accomplished.  Survey says:  Carrie is not ready to buy a home.

I would venture to say that premature home ownership is one of the biggest causes of consumer debt problems.

So, there you have it – I am not ready to buy a house;  it’s also pretty likely that those people who are telling me to buy a house really were never ready in the first place.  So, you enjoy your credit card debt and I’ll enjoy my savings and my landlord.

You can bet that I’ll buy a house someday.  Oh yes, I cannot wait for that day!  Trust me though – it won’t be a day sooner than I am financially and mentally ready.

What do you think?  Do you think people buy houses before they’re ready?  For the renters out there – do people pester you to buy, buy, BUY?

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  • I agree…furthermore, a lot of people that would meet these guidelines buy houses out of their price range. They also forget that a bigger house will have bigger monthly expenses. I do disagree on point no. 6 though – I think you can safely purchase a house with someone other than your spouse as long as you have appropriate checks and balances in place.

  • I am right there with you, Carrie. All I hear from friends and relatives is that I should be buying a house instead of renting. But I’m still in school! I have practically no savings and tens of thousands of dollars in debt for student loans! How am I remotely ready to purchase a home?

    I think a lot of people lack the maturity to realize they’re not ready to buy a home. Like my coworker K who has a car loan of $9,000 at over 20% interest, is living with her sister, has a 5 year old daughter and went back to school last year, along with no savings. She’s ready to buy a home (has even given herself a March deadline) just so she can get the $8,000 tax credit. I asked her why, and she said her daughter deserves a yard to play in. Am I the only one seeing a problem with this?

    Good for you for realizing that you’re not yet ready! I wish more people were like that.

  • I definitely think that a lot of people buy houses before they’re ready. I have friends who bought in a hot market, and now they have ridiculous mortgage payments and a house worth less than what they paid for.

    We are going to save up for the next 3-4 years for our first place. Just like you, we want a sizable down payment and cash to buy furnishings! And I need to ramp up my savings as well. Also, I won’t buy a place with J until we’re married. So there’s a time line for you! haha

  • People used to pester me a lot about it, but that’s stopped now that I’m renting. (I was living with mom/dad before.) Every now and then I wish I had bought, but that lasts for about 5 minutes at a time.

    Besides, most of the places I could “afford” were part of an association….which have ridiculous rules and their fees are always going up. I’d hate to buy in a situation like that where I can’t do what I want to my home. Plus, if you have neighbor problems in a townhouse or apartment you can’t just up and leave like you can when you’re renting (at the end of your lease, of course)….it’s little things like that that make me a happy renter.

  • I totally get pestered, but I’m much older than you. In many ways, I think I should be a homeowner. However, I live and want to stay in a high cost of living area so that may never happen.

    I do NOT want to be cash poor. I have seen what it does to people. The stress is not worth it. I understand that many people do it for their children. However, in this day and age, who really has a stable job?

    I think the old 30-year mortgage/ home ownership = wealth mentality worked well for previous generations, BUT it’s not a reality for Gen Xers and younger unless you’re in a very lucrative field.

  • i am a renter and i hear that i’m “wasting money” from my friends all the time! i know that i’m not ready to buy a house. i’d like to have a lot more money saved and have a job that i intend to keep for longer than 2-3 years. i really like the flexibility of renting. i commit to a year at a time! 🙂 being one year out of school and still unsure of where my career is going to take me in the future…i don’t want to be tied down to a house.

  • It’s so expensive to buy where I live. I want a condo so badly, but I don’t think it will be happening all that soon. Also, I worry about all of the potential changes in my life situation that could change my housing situation: new job, possible husband/family, etc.

  • You know, a new thing on my bank’s website is a ‘case study’ type thing on couples and their finances. The current couple? Homeowners who get into trouble after a layoff, who have NO savings and some debt. Again – how is it they’re supposed to have got a mortgage in the first place?

  • I could not agree more.. most of our friends have purchased houses beyond their means, and have little to NO safety net in case of an emergency! It is scary. The amount of interest they are paying may be even scarier!

    I think a lot of young adults just think they are entitled to these big, huge houses, and that they’ll make more money in the future so they can afford to ‘stretch’ themselves now. They are emotional decisions and not financial decisions. On the surface it makes them look successful and like they are rich, but look a little closer and it is a financial disaster waiting to happen.

    My husband and I continue to rent because the cash flow allows us to make huge payments on our student & car loans, and eventually to save for a big down payment. I want a house more than ANYTHING, but I only want it the right way. Big down payment, 15-year mortgage, decent emergency fund, and no other debt. An $8,000 tax incentive is NOT going to change that! I try not to let people’s pressure get to me, I just remind myself that what I pay in rent is about what they pay in taxes & PMI. And, in 5 years when I do have a house, I’ll have way way way more equity in my house by saving now for a big down payment than if we stretched ourselves now with a huge mortgage. *sigh* i could go on for days!

  • People don’t realize that the cost of the house isn’t just the sticker price! There’s closing costs, miscellaneous expenditures, taxes, utilities, and MAINTENANCE. This can run you several thousand per month over and and above your mortgage payments. So before anyone goes crazy over an $8,000 tax credit, which really isn’t a big deal, please realize these costs.

    Thanks Carrie for this article. Hopefully it gets to enough people before they make a premature decision.

  • I’m also a renter! I don’t want to own for a LONG time because it means SO much maintenance and yes, it costs a lot of money. I also want to be married and have a 20% downpayment.

    (I posted about this exact topic recently, too!) 🙂

  • I think a lot of people do this, sadly. C’s sister & her husband bought a townhouse, and they make much less than C and I. They had to do a piggy-back loan for their downpayment. And yet, his parents are now pressuring us to buy – even though we only have one income!

    Personally, I like renting. C wants to buy, but I think he has been listening to the pressuring, because he keeps throwing around stuff like, “We’re throwing away money on rent!”

  • I’m married with 4 kids, and we rent. I’m a SAHM & I know if we were to jump & buy a house we would be squeezing pennies like crazy with absolutely NO wiggle room! Not fun… my husband just got a promotion & we’re especially hearing it now… but most don’t realize that this gives us a boost, but just enough to get our savings (long term, emergency, Xmas) going again after a very tight year! It gets frustrating…

  • I get pestered all the time too. I agree with everything you said. I want to have more savings, a good down payment, etc. In addition, I want to be married to BF before we make that leap. Also, neither one of us is sure that we want to stay in the city we’re in right now, and we want to have the freedom to move anywhere in the country, like Paranoid Asteroid did, if the opportunity arises. The house credit is great, but if you have great credit and savings, it won’t be necesssary when the time is right. PF Renters unite! 🙂

  • I would LOVE to buy a place… but I totally can’t afford it 🙁

    My mom has been pestering me to buy… because the market is cheap and b/c of the tax credit. Although, she paid for her entire house in cash (built little by little), and I kind of think that would be awesome (although I’m realistic that it’s just not a remote possibility).

    Boyfriend is VERY eager to stop “flushing money down the toilet” renting. I tend to agree that I’d rather build equity in a home, then throw my money to the rent gods, but I know we can’t afford to buy yet (without some parental help). Our friends have also started buying, which makes us extra eager, but then we consider that they’re in VERY affordable markets (I couldn’t even get a studio condo in LA for what they paid for their 4 bedroom houses back east.)

    We would buy together in a way… technically only one of us would buy it, and the other would pay half the mortgage in “rent”. However, I’m not against buying together before marriage, since we’ve been together for 7 years!

  • You are so right, I know someone who did buy a house, who has quite a bit of debt and has already used that $8000.00 tax check on furnishings and guess what, the check has not arrived in the mail yet!!! this person is a smart person too but would not listen to reason because in their opinion, rent = throwing $$ away.

  • I totally agree with you on this! I have been pestered as well about when I’ll purchase a home for the last year. I don’t feel ready financially to take on a mortgage, nor am I ready to “put down roots” yet. At this time in my life, I like the flexibility of renting and the fact that if something breaks down, I can give my landlord a call to fix it and thankfully I have a very attentive landlord.

  • I have to call bs on the “never buy a house with someone other than your spouse” comment. You can still be protected and unmarried. I’ll be a lawyer soon, but non-lawyers can easily google it and find information on the steps they should take. And just because you’re married doesn’t mean you’ll be together forever. My bf and I are nearing 6 years… I’ve known quite a few people with marriages that didn’t last half that.

    As for your questions, I’ve never been pestered, nor have I known people who have bought houses before they were ready. I would love to buy a condo in the next few years, but I realize that may be impossible. I agree, home ownership is a huge responsibility, and it can’t be undertaken lightly.

    • It’s just my personal opinion and belief that you shouldn’t buy a house with someone that you’re not legally joined to. I understand where you’re coming from, though, and like you said – you know the legal ramifications better than I do. That said, owning a house with my boyfriend or friend is not something I ever wish to partake in. There may be ways to make the process less messy – especially if you know the legal ins-and-outs – but I’d rather just avoid it all together.

  • I was pestered back when I graduated from law school in 2005 to buy a home because it was so easy to get a mortgage. My friend did, and had to fight off foreclosure at least 3 times in the next 4 years. It didn’t feel right to me. No savings, no job, no down payment? I’m not that comfortable. Now my boyfriend and I are working to save for a down payment, after other debts are paid off. And Carrie, I have to agree with you. I’m a family law attorney, and I wouldn’t buy with someone I’m not legally joined to either.

  • You’re of course entitled to your opinion. I interpreted it as a general instruction to the masses though, and that’s what I take issue with.

    The only thing that would compel me to get married is if my bf and I decided we wanted to have kids. Otherwise, there aren’t enough benefits. I see no problem with going to a real estate atty to draft a contract prior to purchasing a house.

    Whether you’re splitting from a long-term relationship or divorcing, things can get messy. I’m sure you realize that, Ronnie. Can you really say that things get messier for unmarried couples (assuming they have a written agreement)?

    I think it goes without saying that people who’ve been together for a short time shouldn’t make big commitments… marriage and house buying included.

    • Well, that’s what a blog is: a person’s opinions given to the masses (be it instructions, guidance, or complaints). I’m sure there are blogs that proclaim student loan debt is considered “good debt” or that borrowing money from friends is okay. You won’t find that opinion here, nor will you find me giving out advice to buy a house with your boyfriend!

      Anyways, we have different opinions and that’s okay. 🙂

  • There’s a difference between saying “Never do this” and “I think you should never do this.” I don’t do the former on my blog. I’m not qualified enough to do it. (unless it’s something along the common sense lines of “never set yourself on fire” :P)

    I think you should’ve added a qualifier in there. Or if you truly feel that no unmarried person should ever buy a house with someone else (sucks for most of the gay people out there!) – provide an explanation.

    Otherwise, it’s kind of irksome to the folk who have already bought a house with their significant other, or who are contemplating it.

  • What a lot of people also don’t realize is that the tax benefits of home ownership is a tax deduction and not a tax credit. If buying a home isn’t a good financial decision, no tax benefit will make it otherwise. Great post!

  • You are so right! My husband and I just purchased our first home at 30. We bought a house that was move in ready. I cannot believe how much of our free time and money is eaten up by this house. We have to keep with with the yardwork, set up for people to check up on it when we are on vacation, come home from work all worried that the sump pump still works or that leak we just fixed did not come back…etc. And we are two people tackling this.

    I cannot imagine what owning a house at 20 by myself would have been like. I remember people all pushing me to buy, buy, buy. I instead rented, traveled like crazy, and saved, saved, saved. I feel very fufilled that I was able to live my 20s and now that I’m married and ready for a family I don’t feel bad for being ‘forced’ to stick closer to home. I imagine I would have gone through a midlife crisis if I had to look back at my 20s and realize all the wasted opportunity to do whatever I wanted whenever I wanted because I was anchored by a property.

    Call us big babies, but my husband and I think owning a home is really hard work and are very glad that we waited till we were mature and till we got young living out of our systems.

  • I just did a google search for “house poor” and came across this blog. I am 32 and bought a 2 family home 1 year ago and have been renovating it and am completely exhausted. I think home ownership is overrated. It’s incredibly expensive. Way more expensive than renting. People are always saying, “but you can do whatever you want to the house,” and you sure can, but it always costs money. I disagree with the former post and the general sentiment, that if you buy a house you are “settled” and have to stay put. You can travel and go on adventures at any age. You can sell property or rent it out.

    So for today I am fantasizing about renting a small 1 bedroom in the middle of a city and focusing on my social life. Not house work.

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