Many people dream of becoming homeowners, especially given the benefits involved. When you own property, you get to call the shots. You also get to build equity in a home instead of throwing money away on rent, all while enjoying some lucrative tax breaks.
But although you may be eager to become a homeowner, the last thing you want to do is dive in before you’re ready. Here are a few telltale signs that you should hold off on buying property for the time being.
1. You don't have enough money for a decent down payment
You don’t necessarily need to make a 20% down payment on your home; often, you’ll get away with putting down much less. But if you don’t put down 20% on a conventional loan, you’ll be hit with private mortgage insurance, or PMI, which is a premium that’s tacked onto your monthly mortgage costs, and thereby makes your home more expensive.
Now, PMI isn’t the end of the world, and in some cases, it pays to take on PMI if you don’t have much in the way of a down payment, but still earn a healthy enough salary to cover your monthly housing costs and more. But if that’s not the case, and the reason you don’t have a decent down payment is that you’re barely making ends meet, then it pays to consider holding off on homeownership until you’re in a better place financially.
2. You don't have any emergency savings
Owning a home doesn’t just mean taking on a mortgage; it also means having to bear additional costs like property taxes, homeowners insurance, maintenance, and repairs. And while the first three items are fairly predictable, the latter -- repairs -- can strike out of nowhere and cost thousands, depending on the issue at hand. That’s why you need a healthy savings cushion before buying a home. If you don’t have much in the way of emergency savings, then you’re better off delaying homeownership until you’ve built up some cash reserves -- ideally, enough money to cover at least three months of living expenses.