Buying a House When You “Can’t Afford It”
I write about personal finance every single day and now I’m faced with breaking one of its cardinal rules.
The rule that, because so many other people were allowed to break, caused the housing market to crumble and brought the economy to its knees.
The rule that all personal-finance bloggers point to and wag their fingers when others don’t follow it.
I’m seriously considering buying my first home without having a 20% down payment.
Why it Matters
If you have 20% to put down, you’ll get a LOT of advantages:
- A smaller monthly payment
- Less interest to pay off over the life of the loan
- No PMI
- An easier time getting the loan in the first place
These are all great reasons to ensure you have at least 20% to put down when buying a home. But there’s more to it than that.
If you don’t have 20% of the purchase price, then you can’t afford the house.
And that’s what I’m struggling with.
Why Not Wait?
That’s the obvious question. I posed it to my readers a few weeks ago and they were pretty unanimous—I should wait until I have the 20% or I should look at a lower price point.
But I don’t want to wait. I want a house and I want to buy it with the 13% down payment I have saved up.
I can’t rationalize this, I just want a place that’s too nice for my own good. Bigger. With stuff I want, like central A/C, a washer/dryer, and two bedrooms. Oh, and I don’t want to live in a garden unit.
Is this too much to ask? Apparently it is. At least for the amount of money I have and make.
- I could wait and continue saving more and more money until I hit the 20% threshold, which would make me feel clean and responsible
- I could buy now, say screw it, and deal with the consequences later—including the guilt
- I could raid my Roth IRA and come up with the difference that way, which I know is a bad idea in the long term
But I know what I want to do: I want to buy a house I can’t technically afford. At least not by the common definitions that I live by as a personal-finance blogger. So I’d feel like a hypocrite. I’d feel like I’m overreaching.
Does this make me a bad person or just a bad personal-finance blogger?
[I wrote a follow up post to this one over on Wisebread that has gotten a lot of great feedback on ways of making this happen and on reasons why it's a terrible idea. Be sure to check it out and chime in!]
Photo by AMagill