Whether to rent or buy the place where you live is a major decision.
And you’re wondering if you should stop renting and buy a house too. Your dog wants a yard, your kids want a playground, and you wouldn’t mind a garage and an office.
There’s only one problem: You aren’t sure you can afford it.
Understanding all the costs that go into renting or buying a home will set you up to make the right decisions for you. Learn about the benefits and drawbacks of each option as well as other financial factors to consider when making your choice.
Every day, people buy homes when financially they’d be better off renting because it’s important to them to have a place to put down roots. They see owning a home as an investment that can grow and as a source of tax deductions. Similarly, people rent all the time for the flexibility and minimal responsibility it offers, even though they’d amass a larger net worth over time if they bought a place.
You need to question, “Are you ready to buy?”
1. Are you out of debt?
2. Do you have a full emergency fund saved?
3. Do you have enough cash for a 10–20% down payment?
4. Will your house payment be 25% or less of your monthly take-home pay?
5. Do you plan to stay in the same location for more than three years?
What can you afford?
It’s important to buy a home you can afford to enable you to become a successful homeowner. Determine what mortgage payment you can afford based on your income and debt-to-income ratio and learn ways to budget for a home of your own.
Owning and renting each has its advantages, but what’s best for you depends on your circumstances. Here are some things to keep in mind as you weigh the benefits of renting against the benefits of owning.
You pay less upfront.
Your landlord is responsible for fixing things like a leaky faucet, not you.
Relocating is easier.
Rent can increase.
Not building equity, helping someone else do that.
For years, the rule of thumb stated renting is cheaper than buying—so renting freed up money for other things, such as savings. However, that may not always be the case. Shifting real estate markets mean it may be cheaper to buy than rent in certain areas, though you likely need to pay more upfront. The right option for you is the one that best fits your goals and finances.
The percentage of income needed to afford a median-priced home today is declining, while that for renting is on the rise. This is making buying a home an increasingly attractive option for many people, especially with low mortgage rates driving purchasing power.
Contact me today if you’d like expert guidance on exploring your home buying options while affordability is high.