Top Reasons Not to Buy a House

Home affordability is at its lowest since 2006, and buyers who could afford a house just a year ago may not be able to because of surging home prices and mortgage interest rates. Though it's touted as one of the best ways to build wealth, particularly for retirement, strapping yourself to a mortgage isn’t a financial investment that makes sense for everyone. Depending on your phase of life and financial situation — including just how much a low credit score can cost you over time — it may be wiser to rent. 

Related: Buying a home? Ignore This Outdated Advice

One factor in applying for a mortgage is your debt-to-income ratio. It's calculated by adding up all your monthly debt payments (credit cards, loans, etc.) and dividing that figure by your gross monthly income, and multiply the result by 100. "Even if your credit score is pretty good, over 670, having a high debt-to-income ratio (over 40 percent) will land you right back in the subprime category," says Christian Stewart, a financial coach with Do Better Financial. When it comes to credit scores, a Zillow analysis shows that buyers with a fair credit score rating could end up mortgage payments that are $288 more a month than those with excellent scores — costing them an additional $104,000 over the life of the mortgage.

Related: Secrets Realtors Don’t Want You to Know

It's important to be honest with yourself about whether you can truly afford a home, says Christopher Flis, president of Tennessee-based Resilient Asset Management. "By afford it, I mean you do not borrow from your retirement accounts for the down payment, the occupancy costs of the home do not exceed 25 percent of your gross income, and you do not plan to do a revolving door of upgrades to the home," he says.

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Unless you're buying a house on wheels, you're stuck in one place. "If you're in the military or have a job that transfers you every couple years, buying a home can become more of a burden than a blessing," says Stewart, the financial coach. "Trying to sell a home quickly typically means you take a loss or become a long-distance landlord, neither of which is ideal." When you can commit to a location for three to five years, buying a home makes more sense.

The local school system should always be factored into a home purchase, and areas with great public schools are usually more expensive. If you can only afford a home located in a less-than-adequate school system, you may decide to move later if your family expands. Unfortunately, that may not be so easy — a bad school district can tamp down interest from prospective buyers along with the future sale price of the home.

Buying a house when you've just started a new job can have downsides. If the job doesn't work out, you may suddenly find yourself struggling to make the mortgage payment. If you simply don't like the work, you may be stuck in a job where you're unhappy just to stay afloat.

There are certainly banking institutions that will work with buyers who have less than ideal credit, but they offer nonprime mortgages (what used to be called subprime mortgages), which come at a cost. "Subprime mortgages tend to have higher or adjustable interest rates, which translates to paying more for your home in the long run," says financial coach Stewart. If you have debts in collections or judgments against you, get those cleaned up before a home purchase, as that will help you qualify for better terms.

Amortization, or spreading mortgage payments over a number of years, is important to consider before buying. "With amortization, you don't really start tackling the principle within your mortgage until about seven years," says Shawn Breyer of Breyer Home Buyers. At the same time, wage and salary workers typically stay with an employer for a little over four years, according to the Bureau of Labor Statistics. That means those who move for their next jobs don't build equity; they lose money by owning.

Cutting the grass, keeping the gutters clean, wrapping the pipes when the temperature drops to freezing — all these things are your responsibility as a homeowner. If you're already busy or don't enjoy house projects, then home ownership may not be for you. Other housing options, such as condominiums, offer many of the benefits of home ownership with less responsibility.

If you live in a part of the country where tornados, earthquakes, hurricanes, wildfires, or flooding are not unusual occurrences, you likely will have a much steeper home insurance premium. Though most homes with a mortgage must have insurance (banks require it in order to lend money), those who live in areas that are more susceptible to natural disasters pay a far higher price for home ownership.

Divorce or separation may not be a comfortable prospect to consider, but when contemplating a home purchase with a partner, they're important to keep in mind. "If your relationship is already rocky, buying a home will not fix it," says financial coach Stewart. "If you split, the emotional stress will be compounded by the financial and legal complications required to split your assets."

Many home buyers fail to consider the monthly cost of condo or homeowners association fees (and restrictions). Depending on the location and features of the community, the dues can be in the hundreds of dollars. The money is used to maintain things like the landscaping and amenities such as a swimming pool or tennis courts. "If you can't afford to pay the monthly mortgage payment and the condo fees … it would be better to rent," real estate agent Allison Bethell says.

For those approaching retirement age, owning a home may not be the smartest move, says Lingke Wang, co-founder of life settlement marketing company Ovid Life. "Renting may present more options and less stress, while helping to increase the quality of life in retirement," he says, adding that many apartment complexes offer desirable amenities for seniors, including opportunities to socialize. There's also no need to care for a yard.

As a renter, when something breaks, you simply call a landlord or property management company and they take care of the repairs. If something breaks when you're a homeowner, however, it's your responsibility, financial coach Stewart says. You are responsible for all maintenance, whether it's a broken toilet, a water heater, or a furnace — and the expenses can add up quickly.

For a long time, home ownership presented a number of tax benefits, including the ability to deduct mortgage interest and property taxes. That changed under the Trump administration with the passage of the Tax Cuts and Jobs Act in 2017. "[The tax bill] limits some of these benefits, changing the rent-versus-owning dynamic in many high-cost states," says real estate investor Ryan Goldfarb. "While it may not tip the scales entirely toward renting, some of the benefits to homeownership will dwindle."

The water and sewer bills associated with home ownership can be a rude awakening for renters. In some cities, like San Francisco, San Antonio, and Austin, Texas, the bills can be over $100 every month. If you're not financially able or prepared to take on such hefty expenses, home ownership may not be right for you.

If you don't have an emergency fund in place before buying a home, handling surprises becomes much more difficult. "An emergency fund is in place for a rainy day, and when you own a house, it's going to rain — literally and figuratively," says financial coach Kalen Omo. "When the roof leaks or the plumbing breaks, you need a fund that you can go to in order to take care of those things."

For those who are already in a tight spot financially (think: juggling bills or regularly overdrawing a bank account), buying a home will almost certainly make things worse. "If you want your home purchase to be a dream instead of a nightmare, get full control of your spending before you start shopping," financial coach Stewart says. The first step: Create a budget and stick to it.

Don't make a major life decision like buying a home due to societal or family pressure. "While it may be tempting to buy a house just to silence the masses, the financial and time commitments required for home ownership are too high to make this decision lightly," Stewart says. "Unless your family or friends are ready to write checks to help you with the mortgage and maintenance, don't buy a house unless you truly want one."