I keep reading these articles about how buying a house is a bad investment or that buying a house is a mistake.
In general buying, a house isn’t a mistake. We all need a place to live and when we own we can build equity. It is even possible to own a house long enough to pay off the mortgage. Mortgages generally don’t increase over time and are a hedge against inflation. Homeowners can count on taxes and insurance costs going up every year.
Buying a house isn’t a mistake but buying the wrong one is. Usually, the wrong house is a house that is too expensive and is in a neighborhood where everything is expensive. Too expensive is relative to income.
I have known people who have spent most of their income on that perfect house. As a result, they haven’t been able to afford home repairs or furniture. We call it being house poor.
Being house poor can have a huge negative impact on a family. Ideally, we shouldn’t spend more than 30% of our income on housing. Less than 30% is even better. Take other payments into consideration like student loans, credit cards, and car payments before making any decisions. Sometimes it makes sense to pay off some debt before buying a house.
Renting can be a great option for people who don’t want to be tied down. People who rent and who have extra money can invest it in all sorts of things especially if they can spend less than 30% of their income on housing.
