Home Ownership: Did our Grandparents Have the Right Idea?

Posted June 25th, 2010
by HomeownersInsurance.org Staff (no comments)

Most of us who find ourselves considering buying a home for the first time have grandparents who bought their first homes and lived their American Dreams somewhere in that idyllic period between World War II and the Viet Nam War. You know the times we’re talking about. The Golden Age, as many refer to it. Days when owning a home and taking out homeowners insurance were as American as baseball and backyard grilling.

Back then, owning a home was considered by most to be an integral part of the American Dream. An affordable housing market crossed paths with a generally good economy, and home ownership rates rose to heights unseen since the Homestead Acts that followed the Civil War.

So, were our grandparents right? Should we all strive to own a home? That’s largely a personal decision, but in many ways home ownership still makes a lot of sense, even in turbulent economic times. Maybe it makes sense especially because of the turbulent economic times. But, our grandparents had some other concepts about home ownership that we would do well to consider, too.

  1. You should have 20% down on a home, preferably in liquid cash. This is a concept that just a few years ago seemed to be totally eradicated from our national consciousness, but it makes good sense. If you can’t afford a significant down payment on a home, you’re probably not going to be able to roll with life’s changes well enough to keep up mortgage payments on one, either. Save first, then buy.

  1. You should only buy as much house as you can pay for. Buying a home with an interest only mortgage isn’t any better than renting. In fact, it’s worse, as it adds considerable liability. Buy a home that is within your budget, generally 25% or less of your gross income.
  1. Buy a home to live in. Too many people in recent years have looked at a house as an investment. Many received a rude shock when they discovered that property values, like any other investment, can go down. While it’s a good idea to look at the potential increase in value, don’t buy a home solely based on that. Buy one you want to live in. If the market tanks, you may have to be there a while.
  1. Don’t forget to take cost of living into consideration. Your mortgage is only one part of your living expenses. Consider also the costs of taxes, utilities, homeowners insurance, and upkeep.

Maybe home ownership is still an integral part of the American Dream. And maybe it always should be. But, let’s follow the wisdom of our forebears when it comes to how we approach home ownership.

Categories: Advice

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