Buying my own place.

For the next two posts, I’m going to go more in-depth about two chapters from Rich Bitch, by Nicole Lapin, that really made me think.

I always wanted to buy a house. A big part of this was HGTV, but also the independence and stability from owning your own home seems like a no brainer to me. Well, it did. After I read Rich Bitch, where Lapin pretty much recommends not buying a house, this changed. In the book, she recommends only buying under the following three conditions:

1. You’re going to live in it for a while;

2. You can afford it; and

3. You have a steady job that you love.

You’re going to live in it for a while.

Right now, I am not planning on staying where I am for the long term. If this changes, say I meet the person of my dreams and they want to stay here, then I reserve the right to make a different decision then, but for now this is a big nope.

What I really want to do it move abroad. I’m working on getting my Italian citizenship right now, so likely this will look like moving to Europe. Of course Italy would be amazing, but so would a number of other countries. One thing about living abroad is that the cost of living is lower than in the States, even in Europe.

You can afford it.

In the chapter “Step 4: Put a Roof on It: Home is Where Your Stuff Is,” Lapin reminds the reader that only 35% of you net salary should go to your housing in your budget. This alone is a good reason for me not to buy a house or a townhouse or a condo. The interest rates are hovering around 7% so even a cheap condo in a dangerous neighborhood will have a mortgage I can just afford. And that just the mortgage. The 35% going toward housing from you budget is really everything that goes into your housing. Mortgage and bills, plus anything that might go wrong in the house, and something always goes wrong in a house.

This is assuming I buy after I get out of debt. Before that, I can’t afford anything.

I will say, technically, I “pre-qualified” for a loan of around $140,000.00 right now, so I could qualify to buy a condo now and it wouldn’t even have to be in a dangerous part of town. But! I would have to go above the 35% housing budget, and I don’t want to do that. And besides, just because you qualify for a loan doesn’t mean you can afford it.

Basically, I needed to make an educated decision about whether or not I wanted to save to buy or save to do any number of other things. See move abroad, above.

Then there’s the equity you get on your house. She basically says that the equity you could get in buying only really counts if you plan to stay in it long term. Plus, the housing market could flop, causing you to be upside down on your mortgage, where you own more than the house is worth. As of this writing, we just had a housing boom where houses appraised for much more year over year so the equity people had in their home went up by a lot, year over year. This is unprecedented and isn’t likely to continue.

Equity - Home equity is the profit you’re making from owning your home. So, your home is appraised for $250,000.00 and you owe $150,000.00 on your home still, this means you have $100,000.00 in equity on your home.

Basically, with inflation, you aren’t really going to make money on your equity. She says just invest in the stock market if you want your money to make you money, not in a house.

You have a steady job that you love.

Let’s just… skip this one, if you know what I mean. I’ll talk about this more in the next post.

Pros & Cons

Here’s a rundown of the pros and cons to consider when thinking about buying:

Pros:

1. Money will come back to you later in equity.

2. Your mortgage payment will remain fairly steady year to year whereas your rent could increase.

3. First time home buyer tax savings.

Cons:

1. If anything goes wrong, you pay.

2. The money going toward the home can go toward anything else.

3. The home can lose value.

Looking at this list makes me lean toward renting over owning. I just envision myself being upside down on a mortgage with broken appliances. Lapin says, “if you’re even thinking about selling, you shouldn’t be buying.” Buying a home isn’t a get rich quick plan.

What about you, are you saving to buy a house? What do you think about Lapin’s advice? Let me know!

Talk soon, Madeleine