I have never seen people as stalwartly bigheaded as we Americans. We want to be proud of buying and living in our own home even if we are walking through the shards of the biggest housing disintegration of the century. Oh, and why not. We are backed by our government with the remarkable tax credit that will probably keep extending till 2012, if the world doesn’t end then that is.

Having a home means having a secured place with money invested in to buy it. For this investment we search for the best deal, a place with best views and comforts at a reasonable price. Even if the price is high, we have banks that provide mortgage at a very low down payment. And we can easily avail one. His recession seems to be a blessing in disguise for all of us homebuyers.

However, before you sprint and clutch your favorite corner of the house that you are about to purchase, are you sure you are not wasting your funds? Maybe you are not. Then, at least you can ensure that you are not finalizing the deal based on some futile myths.

Here are the common ones that we keep reciting:

1. It’s a long-term investment

   If that’s what you think, then probably you haven’t glimpsed through the statistics of benefits of people who similarly misinterpreted their house as a long term investment. People who bought homes from the year of 1975 to 2008 have definitely seen a rise in the housing prices, but at a rate quite slower than most of the stocks or bonds. To be precise, the housing rates increased just around 1% per year whereas the benefit on funds invested on Treasury bills was over 2% per year.

   If you are among those people who are interested in ‘high risk, high return’ investment, you would not like to hear that Moody’s corporate bond provided profit of over 6% per year and S&P 500 stock increased by 8% each year from 1975 to 2008. The pleasure of living in one’s own home is unmatched. However, it cannot be named as ‘long tern investment.’ It’s a myth.

   If you are really searching for an investment, the stocks and bonds are still at a lower price than their worth. Buy them instead of a house.

2. The newly introduced First Time Homebuyer Tax Credit is helpful

   $8000 tax credit that you are eligible for as a new homebuyer may not necessarily help you to save $8000 or even $1. The federal government had released some pressure off new homebuyers by easing the regulations. So there was a steep hike in demand for new houses. Then Mr. President introduced our favorite ‘First time Home Buyer Tax Credit’ due to which people who never thought of buying a home started looking for one. This compelled the prices to rise in the areas where demand exceeded supply like the metro of Washington. So, this new tax credit has caused prices to reach at such a high level that wouldn’t have been so high if the program wouldn’t have been introduced. See what Mr. President have done to you.

   In order to save $8000, you pay $20,000 more than the real cost of the house. In short, this program seems to be helping ‘home sellers’ instead of ‘home buyers.’

3. You become a better and responsible citizen after you buy your own house

   Now that’s what I call a real myth. People believe that owing a home involves investing scores of funds which automatically makes you a responsible citizen. Expect financially, you also involve in taking proper care of you house and neighbors. Does it still sound logical? There is no awe-inspiring proof that confirms this kind of bogus fact. Instead I have better arguments and proofs that confirm the contradiction. The rate of house ownership in the countries of Denmark and Germany is lower than 40%. This means it is 68% lower than us. But I haven’t found many German citizens with psychological disorder or socially-mad behavior in today’s news paper.

   Ok. On the other end the ownership rate is 80% in Spain, yet there no TV or radio shows mentioning than Spaniards are better than Americans.

   People also argue that they become independent after owing a house. However, it happens even when you move in a rented house. The sense of independence depends on your lifestyle and decisions and not house ownership.

4. It’s quite affordable to purchase a house when down-payments are low

   It doesn’t mean you have to buy a house if the Federal Housing Administration is offering mortgages with just 3.5% down payment without considering the consequences you may face later. Huh? Consequences? Yes. Let me explain this to you with the help of an example. Say the house is worth $100. You pay $3.5 as down payment and owe the remaining mortgage debt of $96.5. The more debt you carry home, the more are chances that even a small price fall will make you owe more than the house is actually worth. This situation of a consumer is called as ‘underwater’, also ‘upside down.’ In the above instance, a fall of just 4% in the price can lead to ‘underwater.’

   A similar mindset by Bear Sterns and Lehman Brothers that made use of debt to equity ratio helped them to achieve nothing but collapse effortlessly.

   You feel it’s better not to repay the mortgage rather than owing an overpriced house with lesser current market value. So, along with down payment, you also lose all the money spent on renovation of this new house. Not to mention the credit score that will be reduced by 25-30%.

   However, if you decide not to pay the loan, have you given a thought to your next residing location? I asked this question because until you pay off the existing mortgage, you won’t get a new one. A recent research says that people with good credit score relocate more than people with bad one. That’s because the non-payers of mortgage are helplessly stuck at one place and cannot avail other loan. The recent sub-prime crises will generate many such stuck-homebuyers.

5. It’s better to own a home rather than pay expensive rent

   Maybe you are saved from paying rent to your landlord, after you own a home. But you still have to pay an amount which can be higher than the rent. You have to pay the maintenance cost along with monthly mortgage payment.

   You also know that most of the point I mentioned above are just myths, still you want to own a home because it give you a sense of security and pleasure. However, do not expect anything more than the illusionary security and pleasure because it wouldn’t give you the profit that you are searching for.

   You need to face the fact that the only reason you want a home is because you want to fulfill your emotional desires and not make money, because it can’t make any.

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