Personal Finance Advice

Many people jumped into action once they realized there was a tax credit available to some first time homebuyers. If you have been in the market for a home, and you qualify for the $8000 (or less) tax credit, this can be a great time to buy a home before the tax credit offer expires. There isn’t a lot of time left, so there are some people who are in a panic to buy.

Is it time to buy a house? While a tax credit is certainly an attractive bonus that may sway you toward homeownership, this still may not be the opportune time for you to jump right in an submit a bid on a house. Buying a house is a huge financial decision, and even though the tax credit can be quite attractive, the $8000 will probably be long gone by the time you start developing financial hardships as a result of buying a house before you were really ready to do so.

This doesn’t mean that nobody is ready to buy a house. To the contrary, some people who finally took the homeownership plunge after getting enticed by the tax credit were more than ready to buy a home. They had substantial down payments built up, their credit score was high, and they were secure in their jobs. Not everyone is quite so ready, however. Buying a house before you should can result in money problems down the road.

Before you buy a house, first figure out if you are doing it for the wrong reasons:

“I want the tax credit.” Who wouldn’t like $8000 in the form of a tax credit? Don’t just look at what you can get by buying a house right now; take a look at the problems it can cause if you buy a house before you’re ready.

“Houses are cheap right now.“ While it is true that in many parts of the country it’s a buyer’s market, it really doesn’t matter how great a deal you get on a house if you can’t afford the monthly mortgage payments.

“There are so many foreclosures to choose from.“ Buying a foreclosure can be much more complicated than it looks. Never assume that buying a foreclosure is going to be a cheap and simple process because sometimes it isn’t.

“I can just sell the house when I move.” Unless it is your intention to become a landlord, you shouldn’t buy a home when you know you will be moving within the next year or two. You might wind up losing money, especially if you can’t find a buyer or a renter.

If you are truly ready to buy a house, and you qualify as a first time homebuyer, this can be a great time to buy. If, on the other hand, you think you might be ready just because you want to get your hands on the tax credit, it may be time to take a step back and look at the bigger picture. Don’t put yourself into possible financial peril in the future just because you want an attractive tax credit now.