My sister and her boyfriend have made the monumentous decision to purchase real-estate together.  They’re looking for something in the $100k – $120k range, and are willing to live in less-desirable neighborhoods in a home with high demands for improvements.  They have exactly $20k in savings, which they plan to use entirely for their down payment. 

Frankly, I believe this to be a terrible idea.  Not buying a home, but using every penny that you have to fund your home purchase.  Particularly when buying a home that requires repair.  But when the only way to afford a house is to spend all of your savings, is it then appropriate?

I have had extensive conversations with F, my pseudo-brother-in-law, about this choice they’ve made.  “We need the money to get a loan,” he’ll say.  “But what happens if there’s an emergency for which you need that money?” I’ll protest.  “We’re going to get a credit card for those situations,” F counters.  “But…(gasp)….if you don’t have the money when the emergency comes up………” I pause, trying to catch my breath “……….how are you going to pay the credit card in full when the bill comes?”

To date, he has yet to come up with a good response.

Here are two people that struggle with their finances on a fairly regular basis, and now they plan to stretch themselves even further, with no financial cushion, to realize the dream of owning their own home. 

Meanwhile, in the Mid-West, R’s brother and his wife are preparing to take the mortgage plunge as well.  Not only are they stretching themselves to pay for it, but they’ve also accepted an adjustable-rate term on a portion of their mortgage.  Due to a combination of factors, including low income levels, lack of employment stability, and poor credit, this was the only way they were able to get financed.

R has done his best to dissuade them from buying the house, but they, like my sister and F, are steadfast in their decision. 

I started to wonder why both couples, so abrubtly, decided to buy a house on limited finances, with almost no forethought.  They have not been saving for this goal.  They have not done the legwork to find out how much home they can afford, the burden of property taxes, or the cost of repairs.  They have not spent the last several years evaluating different houses and architectures they like and dislike so that they can confidently make a decision about they type of home they want to live in.  So why, all of a sudden, do they have a burning desire to be homeowners?

Maybe because the time feels so right.  The media, the real-estate industry, the government: they’re all trying to convince us now is the time to buy.  If you don’t buy a house RIGHT NOW you’ll miss the opportunity to strike while the iron is hot.  All of those good deals will slip right between your fingertips, and years from now, when you’re still renting, you’ll look back with regret on your one chance to buy a home.  Don’t miss the boat!

Even I am not immune to these persuasions.  I was recently reading an article about home prices seeing a surprising increase, and momentarily worried that if we didn’t buy a house now, our window of opportunity would close.  And I find myself a bit envious of R’s brother and his wife.  While we have been tentative and indecisive about moving forward with buying a house, they are going for it.  I suppose there is risk with every reward.  But I will not be bullied into making the biggest investment of my life, just because I am afraid it’s now or never.  And maybe that’s true – maybe it is now or never.

But I think I would rather be a financially comfortable renter than a bankrupt owner.