“Should I buy a home or continue to rent?”
This IS always one of the biggest questions that I get when working with clients as a Realtor. Buying a home is a very big decision and not one to be entered into lightly. Chances are great that it is the biggest purchase you will make in your lifetime. There is no simple answer to “should I rent or buy?” The answer, or pros and cons of buying versus renting a home, depends greatly on the individual’s set of circumstances as well as the climate of the market in which you are living.
In trying to make this decision you have to answer several questions first:
How long do you expect to stay in the area? What is your 5 year, 10 year plan and do you have job security?
This can be a tough decision for individuals right out of high school or college. Your adult life is just starting and you may not know where that will lead. In our current economy many people are forced to go where the work is. Many people become rooted in a community or area for various reasons such as family, friends and work so moving out of a certain area is not necessarily foreseeable.
All of the above factors lead to answering 1 question….. “How long do I need to be in my home to create equity or to at least not have to fork out money to make a move?” It does appear as though the time span you need to be in a home to really build any equity is 5+ years
Are you a good borrower (how is your credit score)?
Before you get your heart set on buying a home, your first stop should be with a lender (a bank) to see what sort of and how much of a loan you would qualify for. This will allow you to look at homes within your price range to see if you are still interested in buying. Many people do not realize when starting out that “no credit” can be just as detrimental as “bad credit” in the eyes of a lender. If you are not quite ready to be granted a loan, the lender can help you create a plan to get you in a better place financially to be granted a loan.
What upfront expenses go along with buying a home? Do you have limited funds?
When buying a home you get so much more home for your monthly rent/mortgage than renting, but you can have many upfront costs at closing. This is why it is very important to see a lender before making a final decision to buy a home. Every individual transaction is unique. There are sometimes great first time home buyer incentives available but if you are doing a conventional loan you could be looking at a sizeable down payment in addition to closing costs. Choosing a lender who best fits your needs is one of the most important choices you will make throughout the process. Meeting with a lender and getting a pre-approval is no cost and no obligation!
Can you handle or even want the responsibility of homeownership?
Most individuals starting out do not understand all of the underlying costs and labor that go along with the right of ownership. When you own your home you are responsible for the maintenance both inside and outside according to your tastes. If you like your yard nicely manicured but do not care to or have the time to do so yourself are you willing to pay the extra money to have someone else do it for you? When something in your house fails such as in the plumbing, HVAC etc, you are now responsible for coordinating repairs as well as paying the expense. On the other hand there is much to be said for “pride of ownership.” Buying gives you the anonymity to make your house whatever you can imagine it to be!
- Your home can be your biggest financial asset, owning a home can mean building equity.
- Paying rent builds you no equity, you are helping build someone else’s equity.
- Interest Rates are good, so getting in while they are good can save you a great deal of tastes.
- When you purchase a home it becomes yours to make changes to as you like for your tastes.
- You are not necessarily tied to a huge investment in any particular area. Moving in a short time is more attainable.
- Many people just do not have the credit or the liquid funds to purchase.
- When renting you more than likely do not have the stress of maintenance.
At the end of the day, it is without a doubt better to put your own money into something that you actually own yourself and not into someone else’s property…… that is simple logic. Again, the question of renting vs. buying becomes entirely more complicated when considering those 3 big questions:
What is my 5-10 year plan?
Costs involved in buying a home and getting a loan?
Responsibility of Homeownership?