Buying a new home has many positive aspects associated with it. You will have many financial benefits like you can use the home as a collateral & opt for different loans according to your needs. But it is also true that purchasing a house is one of the most expensive decisions a person could ever make. Therefore, you need to do a lot of research before making that decision. You might find some very compelling reasons to not buy a home. Let us discuss about those probable reasons deeply.
a) Flexibility – Buying a new home will provide stability in your life. But as a millennial, you might not get the opportunity to stabilize in your career-building days. Due to promotion or job change, you might have to relocate several times in a short notice. So, it will be difficult for you to sell your new house in a relatively shot time without having a loss. The main purpose of buying a home is to build a home equity which will be not possible for you in this situation. So, to maintain your flexibility in life, buying a new home might not be your preferable option.
b) Accommodation for a newborn – If you are planning to have a baby, then the house you are buying must have enough space for all of you. In future as the baby grows, he or she will need an extra room for himself/herself. Having a baby is very stressful, so you might get compelled to sell your old house & buy a new big home again. But then the time might get changed a bit & the circumstances may not be suitable for selling your old condo or cozy home. So, you should plan out to gather as much as possible for your future home buying.
c) Financial downtown – You will be required to put down a handsome amount of money as down payment to finance your home purchase. If you don't have enough savings for it, don't opt for a new home right now. The rate of down payment can range from 35% to 20% (as per the lender's choice). So if you can not arrange this amount, may be you should think about it later.
d) Debt & DTI – If you are still suffering from debt related problems, buying a new home might not be a good idea for you. You might have gathered student loans, car loans or any other debt which is eating up 50% or more of your monthly income. That means your debt-to-income ratio is quite high for obtaining a home mortgage. To reduce your DTI, you must reduce your debt by paying student loans, credit card bills & other monthly payments.
e) Bad credit – One of the reasons which can prevent you from qualifying for a mortgage is bad credit. If your credit score is less than 620, it will be very difficult to convince a lender. If somehow you manage to get an approval, the interest rate will be quite high which will affect your monthly payments on mortgage. So, it is recommended to you that first you need to focus on improving your FICO credit score before opting for a new home.
f) Job security – Purchasing a new home with recent loan terms & standards will require a stable employment history. You have a tendency to change your job too frequently, so taking out a mortgage loan isn't the right choice for you now. As a millennial, this might be the early stage of your life where you might need to change your employment status several times. So, taking out a loan will be a very difficult challenge for you. Your income might change due your current job, but the housing costs will remain unchanged. Many home buyers end up in foreclosure because they have lost their jobs.
g) Cash poor – After spending your savings towards down payment, you might feel that your bank balance is reduced to double digits. It is obvious, many home buyers who choose to have a new home often find themselves being a cash poor. It is because you not only have to pay the down payment, but also other expenses like renovation cost, closing cost, etc. So, you must save enough money to aid your unemployment, any sudden health issue or any other emergencies rather than spending it over a new house.
h) Relationship difficulties – It is not that single people don't buy a home, but if you properly examine the majority of the buyers, you will find most of them purchase a house with spouse or partner. If you want to rely on your partner's or spouse's income to make your monthly mortgage payments, think twice. You can't tell that in future your relationship will remain as stable as before. What if your partner becomes unwilling to bear the extra payments? At that point, you will have no other options rather than a short sale or a loan modification. In both cases your credit will be highly affected.
So, as a conclusion, it can be said that whatever decision you would make, try to maintain your financial safety first. After all, you are not supposed to always follow the crowd for making a wise financial decision.