The New York Times recently published an article under a headline that sounded like a do-it-yourselfers’ instruction manual. But instead of a hobbyist’s step-by-step for making macrame wall hangings or scrapbook assemblages, the How-to subject was the largest acquisition most families make in a lifetime: “How to Buy a House.”
There were three “basic questions” for determining whether to buy a house—the first two being:
How long will you be staying in the rental or purchased home?
How much can you afford to pay each month?
If you think you are likely to relocate “in a couple of years,” the jig is up. You can stop at Question 1 and just rent! If, on the other hand, you will be staying put for “more than a couple of years” (actually, 4 or 5 years may fit the timeframe more accurately), the do-it-yourselfer should advance to answering Question 2—which involves penciling out your current monthly housing budget. If you can’t afford to buy a house that will fit your family’s needs, the Times opines that “it may be worth it to rent while you save a bit more.” (Not covered is a how-to for what to do if the monthly rental consumes the entire housing budget).
Only after Step 2 has been satisfactorily answered does it make sense to proceed to Question 3:
What’s on the market? If you were to do directly to Question 3 before completing Question 2, you might waste valuable time checking out Michael Jordan’s Chicago estate, even though the asking price ($14.9 million) could be more than your monthly budget allows. It’s only reasonable to point out that if the mortgage payment ($60,000+) is within your monthly budget, you probably shouldn’t be making the rent-or-buy decision without a roomful of tax advisors).
