Money Matters: Taking the Plunge on a House

Note: Money Matters is moving. Author Ryan Lasker will continue answering reader questions (and more) in a personal finance newsletter that starts next Tuesday. You should sign up.

Hey Ryan, when should I make the transition from renting an apartment to buying a house?—Tai from Texas

I could write a mile-long column about this, but Neal told me I have 200 words. So here goes.

A few prereqs for buying a house: a solid credit score to qualify for a good mortgage rate, cash for maintenance and repairs (2%–4% of your home’s value), and no plans to move for a while. Oh, and some more cash for a down payment—somewhere between 5% and 20% of the purchase price.

Owning a home can make for a great investment. Median US home sale prices climbed 46% between 2007—the height of the subprime mortgage crisis—and this June, per the St. Louis Fed. Real estate is a much less volatile investment than stocks, making it a better place to preserve wealth.

However, just because you can buy a house doesn’t mean you’re ready. For some, it’s much more appealing to rent so that you can dial up a landlord when your AC unit freezes over (not speaking from experience). The average HVAC unit is $7,000, and I cannot think of a more boring way to spend that much money.

Bottom line: Buy a house when you find the perfect place at the right price and are ready to take on thefinancial and physical responsibility.