Most property sellers would argue that home ownership is something everyone should strive for, and for the most part, they are right. There are a number of benefits to owning a home, like not having to pay rent, having a property to leave the family in the distant future, and possessing a financial asset that is tangible and is sure to increase in value over time.
By Jumia House Zimbabwe
However, buying a home is the biggest financial decision most people will make in their lifetime, and like any investment, it also has its fair share of drawbacks. Ignoring the warning signs can lead to a mistake in the decision or buying process, which at best could lead to time wasted and a purchase that does not push through. At worse, it may result in the ownership of a property that is overly expensive and less than beneficial.
To guide you better, read these 10 signs compiled by Jumia House to determine whether you are ready to buy a home.
1. You Do Not Have Enough Cash for Down Payment
While many homes are bought with the help of a housing loan, almost all lenders in the Zimbabwe require buyers to cover the down payment out of pocket, the amount of which is commonly equivalent to 10–25 percent of the property’s purchase price.
Being able to save for a down payment is a good demonstration of financial maturity, particularly when you are able to cover this plus other costs associated with home-buying without leaving yourself short on cash. As a general rule, owning a home in which you have no equity is too risky, so if you have yet to save enough for a down payment, then you are definitely not ready to buy.
2. You Have Too Much Other Debt
If you are already struggling with car loan payments and even medical bills, adding monthly mortgage payments may be what breaks the straw on the camel’s back, where missing these payments can lead to the loss of your home.
Financial experts often recommend that the total load of your debt should not be more than one-third of your gross income. This includes your potential mortgage and other home-related payments. Going beyond the recommended debt-to-income ratio often leaves you with very little financial flexibility, with not much remaining for saving, investing, or other unexpected expenses.
3. You Cannot Maintain an Emergency Fund
Speaking of unexpected expenses, home ownership is undoubtedly one of the biggest financial responsibilities you will handle in your lifetime, and if paying the monthly mortgage and your other bills leaves you no room for an emergency savings fund, you may want to hold off buying until you establish a sufficient financial safety net.
Unexpected expenses can range from emergency repairs on your home, to sudden unemployment, illness, and the like. Lacking an emergency fund not only makes you ill-equipped to handle these unexpected circumstances, but it also ultimately leads to the likelihood of you missing your home loan payments, which can lead to foreclosure.
4. You Do Not Have Enough Cash for Related Expenses
There are also expenses that are not necessarily unexpected but may not have crossed your mind while entertaining the prospect of buying a home. While you may have the money to cover your closing costs and first few monthly mortgage payments, you may yet to establish an allocation for moving and related costs.
Then, there is also the cost for décor, furnishing, and other improvements, as you obviously cannot live in an empty or partly functioning space. While you may already have some savings for your home purchase, you are only ready if this amount is enough to cover more than the down payment.
5. You Jump from One Job to Another
Most housing loan providers prefer borrowers who have been employed and in the same job for at least a year. Being on the job for at least that long simply displays financial stability, whereas constantly changing your job or having gaps in income signals a lack of security.
In addition, a major change, such as moving from regular employment to being on a commission-based occupation, may cause your income to fluctuate, which can lead to uncertainty and take away your readiness to buy a home. Remember, you can qualify for a loan based on past income, but you may suddenly not be able to make the money you expected you could if you change your job later.
6. You Are More Desperate Than Ready
Rentals may not always be the most comfortable places to live in. Some lack privacy, others have rules that are very limiting, and a number may not be well kept. Then there is the occasional landlord or neighbor that is difficult to get along with. Yet, even if you are experiencing all this and more, do not impulse buy a home.
If you are considering buying only to stop paying rent and to get away from answering to a landlord, take the time to really consider each pro and con. A rushed purchase often has lasting financial and emotional consequences that are not so pleasant, and can leave you with a mortgage you cannot afford or a place you do not really enjoy owning.
7. You Are Not Ready to Stay for the Long Term
There is no point going through the arduous process of applying for a mortgage and finding the right property if you have no plans of settling into the home for the long term. For one, you may have to pay capital gains tax after selling the home that you just bought.
Then, there is the agent’s commission for selling your house, which is normally 5 percent. Even if your home appreciates at 1 to 2.5 percent annually, your home that appreciated might need you pay more than you gained if you leave too soon, so why buy when you will not stay?
8. You Have Not Set Any Long-term Plans
Apart from not being ready to stay in one place, you may also be unsure of what’s coming up in your near future. While a one-bedroom garden flat may sound good now, it may not be adequate for you and your future spouse as you expand your family. Or, while present success affords you the opportunity to buy a home, your job might require you to move elsewhere later.
As previously mentioned, it is not favorable to buy a home only to have it sold and move out in fewer than 5 years. There are many expenses involved in marketing and selling your home, and your expected gains, even with the appreciation of the property, may not amount to much during your short ownership.
9. You Are Not Even Sure of What Type of Home to Buy
While you have only considered buying a single-family home, your finances and chosen location may provide you with more options than you expected. For instance, if the area you are looking at has a huge number of potential renters and your savings are enough to buy you a duplex unit, then you might be better off buying a property to lease out and renting something cheaper elsewhere. Alternatively, an apartment unit or traditional house might better suit your needs. Simply put, you know you are ready to buy when you understand what your most beneficial options are. Do not just make a random purchase because you have money stashed somewhere.
10. You Still Have One
While selling a home then buying a new one (in that order) can be a tedious process, buying a home and selling your old one (also in that order) is just too risky. Most average-income Zimbabweans cannot afford two housing loans, which is essentially the situation you would be in should you for some reason get approved for a new loan while still not having sold your current house.
Add to that the costs of repair and maintenance for both your properties as the one for sale bides its time on the open market, and you get incredibly high expenses that could lead to failing to pay for one or both mortgages, and the risk of losing one or both properties.
About Jumia House Zimbabwe
Jumia House is the best online property marketplace that offers sellers, buyers, landlords and renters a secure and easy-to-use platform to find or list properties online. For feedback or more information visit www.house.jumia.co.zw or follow us on Facebook, Twitter: @JumiaHouseZW or email to email@example.com or call 04 740940 or 08080181 (Toll Free from Econet lines)