Young Americans are delaying homeownership because they’re burdened with student loan debt, waiting longer to get married and have kids, and spending more on renting. Some are still living with their parents — especially in certain parts of the country.
Waiting longer to buy a home means there’s plenty of time to prepare financially if homeownership is on your list of life goals.
Below, we’ve outlined seven of the dumbest money moves to avoid before you buy a home:
1. Expect to get a big return.
If someone asks why you want to buy a house and your first answer is something along the lines of “Because I’m wasting money on rent,” or “Because it’s a good investment,” you might not be mentally prepared for all the responsibilities that come with home ownership. At the end of the day, buying a home isn’t a means of getting rich.
“When you look at the average price increase of a home across the country over the last 100 years, it’s only about 3%,” Eric Roberge, founder of Beyond Your Hammock and a certified financial planner, told Business Insider. “If you take away extra costs plus inflation, you’re not really making any money on average on a single family home.”
It’s smarter to look for an affordable house that meets non-monetary goals: It’s in your dream neighborhood or it’s a good place to start a family.
“A home is a utility, not an investment,” Roberge said.
2. Combine too many life events at once.
New beginnings are great, but combining too many life events at once can quickly derail your finances.
Think getting married, adopting a puppy, having a kid, and buying a house all in the same year. Each of these comes with unexpected costs that can eat up your savings if you’re not prepared.
Working toward your financial goals takes time and should happen at your personal pace, not at a time when it seems like it should happen or because everyone else is doing it.
3. Use emergency savings for a down payment.
When it comes to buying a home, the more you have in savings, the better. But the money you’re putting away for a down payment — ideally 20% of the price of the home — should remain completely separate from your emergency fund, which is three to nine months of expenses earmarked for when something goes wrong.
“No matter how well you plan or how positively you think, there are always things out of your control that can go wrong,” self-made millionaire and bestselling author David Bach writes in “The Automatic Millionaire.”
Instead, it’s best to keep your home savings somewhere else safe and liquid, Bach told Business Insider, particularly if you’re looking to purchase in about three years.