by Francis Jock

Created on: November 05, 2008   Last Updated: November 24, 2010

These are difficult times for those of us that are thinking of buying a home. If you are renting an apartment  you are facing making a huge investment decision, but is it the right time to invest in a home, or should you buy a condo instead?. The housing bubble that recklessly drove up the price of homes has burst, and prospective home buyers are perplexed by the possibility of losing thousands of dollars in an deflating housing market.

Much to the dismay of many formerly credit-worthy home buyers, credit requirements have tightened, new home construction has declined, and the risk of losing equity in a falling market is significant in some areas. In some communities, potential home buyers are being squeezed out of the market. On the other hand, apartment renters dreaming of owning their own homes may not be able to buy  without a sterling credit rating.  Given the overall housing market situation, one cannot help but wonder if it is wiser to continue renting an apartment until the housing market turns upward?

What this means is that buying a home is going to be much more difficult than before. First, credit requirements have changed, not because people are more or less likely to default on their mortgage payments, but because lenders want to be absolutely sure that they have money to lend other banks and borrowers and cover the multitude of risky mortgages already on the books. Secondly, mortgage interest rates, which are tied directly to a borrower's credit score, are much higher for anyone without a low-risk credit score. Your credit score is tied to your amount of debt, your track record of making loan payments on time, and other factors such as any overdue student loans, judgments, and other personal financial information. For renter's, a credit score is used only as an indicator of the tenant's ability to pay the rent on time.

Beyond one's ability to get a mortgage in the first place, however, are the problems faced by all mortgage holders. That is the fact that a home shouldn't be treated as an asset on your personal financial report. A house is a home with a long-term mortgage accompanied by property taxes, homeowner's insurance, building code compliance, maintenance and other expenses. Over the term of the typical thirty-year mortgage, a home is expected to appreciate in value and return a profit, or at least break-even, to the home owner upon sale. If you can wait thirty years to realize a profit in today's market you are an exceptional investor.

Today's housing market demands careful consideration of the pros and cons of home ownership more from a financial perspective than an emotional one. The American Dream of home ownership is an emotional fixation that has served as the camshaft for the nation's economic engine for nearly three decades. In some once booming cities, the engine has seized up and may not be restarted anytime soon. In the meantime, renters don't worry very much about making mortgage payments, foreclosure, property taxes, school taxes, and the rising cost of home repair. Renters have and should seize, the opportunity to invest in other assets - those that truly create wealth, such as gold, silver and oil.

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