Decided not to buy a house after all...

[ea1776]

So me and my fiance (mid twenties) are on track with achieving our goals. Those goals are:

1. Live in a different country (probably Nicaragua) within 3 years.
2. Pay off all debt prior to achieving #1.
3. Have 6 months expenses in savings prior to achieving #1.
4. Have 30K in combined retirement accounts prior to achieving #1.
5. Save enough for travel expenses of leaving the country.
6. Continue to pile on savings after everything else is achieved until our leave date.

We were convinced to NOT buy a home, since we could only afford FHA and it didn't really "feel right" to take on a mortgage without a proper EF. Also, it would have been contrary to the various financial self-training and behaviors we've taken on in the previous couple years (many many books read, and also pay close attention to this community).

But NOT buying? OMG!!! That is contrary to what pretty much every other person we talk to tells us. her parents, my parents, coworkers, the government (8k tax credit, tax deductible low interest rates), realtor, mortgage company, etc, etc. We were approved for a substantial amount of money, which surprised us. Apparently, everybody thinks its the perfect time to buy except us. But then again, nobody knows our finances and goals as well as we do!!!!

So I am proud to say that we decided NOT to buy, despite all of the pressures we felt from everyone else! And after the decision was made, we felt a great weight lifted from our spirits. I suppose that's because the mortgage creates uncertainty, in an otherwise well-thought, near-fool-proof, plan of attack on our goals above. The mortgage meant taking on home ownership, a loan, higher cost-of-living, slower repayment of debt, slower accumulation of savings, a lot of risks, etc, etc. The risk/reward ratio wasn't in the favor of buying, as you will clearly see from the scenarios below.

Here was our breakdown and thought process that led us to the final decision.

Best-case scenario if we BUY

• House has no problems.
• 8k tax credit.
• tax deductible interest so big tax refund.
• We keep our jobs and maybe even get raises.
• House appreciates at a rapid rate, and we can sell before me move for a fantastic return.
• We are able to leave the country comfortably, having achieved all the goals I mentioned above, and then some.

Worst-case scenario if we BUY

• House becomes a money-pit, one problem after the other, eating away at our savings and debt payoff goals.
• Lose our jobs and with little savings are forced into foreclosure / financial ruin.
• Housing market goes down and we are unable to leave the country, because we can't sell for profit, or rent for the same amount as we'll have to pay on our mortgage.
• None of the goals above are achieved.

Best-case scenario if we RENT

• We achieve all the goals above and then some, having plenty of wiggle room in the budget for debt repayment and rapid savings accumulation.
• Housing market in our area drops substantially, potentially creating a new entry point that we are more equipped to capitilize on.
• Mortgage rates drop more.
• Government puts in even greater incentives for first-time buyers.
• We potentially fall in love with whatever country we visit and can easily stay there without having to worry about what's going on with our house on the other side of the globe.

Worst-case scenario if we RENT

• Lose our jobs and get evicted. Forced to live with our parents, but at least we don't have to face forclosure.
• Don't achieve goals mentioned above.
• Housing prices appreciate at a rapid rate in our area, leaving us feeling like we "missed the boat".
• Interest rates climb to 15% (worst-case, and I think that's happened before?)
• Government gives no incentive for buying (no tax deductions, not tax credit, etc.)

So weighing the pros and cons, and evaluating the extremes of those potential outcomes really helped us make the decision.

The other great thing that lifted our spirits was my sister will be coming to live with us, which may give us less privacy, but will decrease our cost of living by ~$500/month, and will also help her too! In addition, my fiance just landed a new job which will gross and extra $600/month for achieving goals above!

[disneysteve]

I think you made a great choice. I simply don't understand the pressure to make everyone a homeowner. It is not the right choice for a lot of people for a variety of reasons.

I absolutely would not buy a house if I intended to move in 3 years. That fact alone would be enough of a deal-killer in my mind. I think you guys have a well though out plan and solid goals and made the right decision.

[red92s]

Originally Posted by disneysteve

I think you made a great choice. I simply don't understand the pressure to make everyone a homeowner. It is not the right choice for a lot of people for a variety of reasons.

Amen. The ownership complex is a big part of the reason we are in this mess. When I graduated in 2006 all my friends said renting was "throwing your money away every month". Now two of them are in foreclosure and all of them are underwater by at least 30%.

[Joan.of.the.Arch]

Yep, I agree you are choosing smartly. I cannot imagine even going through all the hassle of buying a home (and then reselling!) when my real goal was to move to Nicaragua in 3 years. Home ownership is not the be-all end-all. I suspect the people who've been advising you to buy want you to stay in the US and think that having a house will help keep you here. I guess they love and would miss you.

[swanson719]

The cost of buying a home is often high enough that it isn't justified unless you keep it at least 5 years. Renting takes away a lot of liability, especially that a home can nickel and dime you to death. Our mortgage broker told us the average family spends 1% of what there house is worth for annual maintenance.

[wincrasher]

Congratulations. You did a thoughtful analysis and made the right decision for YOU. Conventional wisdom is not all it's cracked up to be. Everyone's goals and decision making is unique to them.

Why you want to leave America is beyond me, but who am I to judge?

I'd only recommend buying a house in this market if there was an exceptional deal to be had. Most people buy a house based on how they like the decor. There is so much more to it than that. Location, schools, taxes, resale, neighborhood, price, build quality, efficiency, it goes on and on.

Only buy if you want to put down roots in one place for a long time. The days of flipping every few years, moving up as it were, are now history.