What Are the Risks?

Overall, homeownership is a good investment for most people, but there are risks. If you understand the benefits and risks of homeownership, you can make the best decision about when to buy a home.

So what are the risks of homeownership?

• Monthly housing expenses can increase.
  Your monthly mortgage payment may be larger than your rent. While these higher monthly payments may be offset by a tax benefit at the end of the year, you will still need to make sure you can afford the monthly mortgage payments. Talk to a tax professional to understand your particular situation. Also, think carefully about introductory rates or low initial rates that allow you to buy a home you would not otherwise qualify for. When the rate increases you may find it difficult to make the monthly mortgage payment.

• You become your own landlord.
  If an appliance breaks, you will have to pay for its repair or replacement. You are also responsible for the maintenance and upkeep of your home and your property. Maintenance and upkeep affect your home's value so it is important that you have the budget to fix things in order to protect your investment.

• You may need to sell your house due to life circumstances.
  Depending on the local real estate market, you might not be able to sell your home quickly. You may also face additional expenses, such as hiring a real estate professional. Be sure you have adequate savings as a buffer before you buy a home in case you find yourself in this situation and cannot sell your home quickly.

• Property values can depreciate.
  You can lose value in your home for a number of reasons, such as a recession, the condition of your home not being kept up, or a drop in a neighborhood's home values. If your home loses value and you have to sell it for less than you owe, you will be required to repay the full amount you borrowed. Regardless of your home's value you still have the obligation to pay the mortgage even if the home is worth less than you paid for it.

• Downsizing quickly may be difficult.
  If you need to sell your home, it may take some time and you'll still be responsible for the mortgage until it is sold.

Homeownership is still a great way to create equity for the future while providing stability and security for you and your family. But it is important to look at the benefits and risks and weigh them carefully before deciding if now is the time to become a homeowner.

If you are already having credit or financial difficulties, take the time to work through those issues before starting the home buying process. You will be in a much better position to be a responsible homeowner and you will enjoy the benefits of homeownership much more!