Renting gives you security and a roof over your head. You have no worries when the kitchen faucet needs to be replaced or the fridge goes out. You can also move a lot easier. Want to move into a new apartment complex? How about a new town? That’s easy, just wait until your lease is over.
On the flip side, you may feel as though you’re throwing your money out the window. No ownership. No equity. Owning a home can help to build your wealth and give you a place that feels more permanent. Of course, you can also paint and decorate as you want because it’s your home.
And somewhere in between, there are rent-to-buy homes. With this option, monthly rental payments accrue toward a down payment used to eventually buy the home a tenant is currently renting. This is an especially good option if you find a residential area you don’t want to leave, but no inventory is currently available for purchase. It’s also a good option if you have less than stellar credit and need time to build up your credit score.
There are a lot of pros and cons to weigh, but if you are ready to make this decision, we can help.
For the analytical thinker
You can access a tool at the New York Times that will tell you how much to expect housing prices to rise soon and what kind of return you would get on your down payment if you invested it in stock or bonds instead of a home. This may help you to make up your mind or at least give you a glimpse into the preverbal crystal ball of home buying.
Your housing market
You have heard it a thousand times: location, location, location. Where you decide to buy matters. If you have done any investigation you know that the housing markets are not all the same. You’ll get a lot more home for your money in Arizona than in California or New York. Though experts still insist in most parts of the country it is cheaper to buy a home than rent one. But (here’s the kicker), you must plan to stay where you are at least five years or more. The National average states that buying is 38 percent cheaper than renting. This number is an average; look at the real numbers in the area you want to buy.
Where you will live is something to consider. If the area is at the top of the housing bubble, it may not be a smart idea to buy at all. On the other hand, if you are in an area where homes are just now on the upswing, then buying there is a great idea, even if you may not be living there forever.
What kind of lifestyle do you have?
Home buying is a commitment. Renting enables you to move quickly, whether is for a dream job 3,000 miles away or into the swanky new complex where your bestie lives. You should be ready to put down roots if you plan to buy. The cost of the transactions associated with buying are about 10 percent of the sale price. You could lose your nest egg if you don’t stay long enough to recoup the costs.
Do you love to travel? Do you hate the idea of managing the repairs, HOA, warranty, landscaping, tax, and insurance issues around owning? You may never want to own a home and that’s okay. If your lifestyle and your preferences lean toward renting, then rent.
These are all quality-of-life questions that no calculator can take into account.
Your financial goals
Down payments vary with the type of mortgage you get. They can be as small as zero down, or as high as 20 percent and beyond. What does your savings look like? It is a very competitive market. Sellers may choose offers with higher down payments and fewer strings attached over no down payment at all. The higher the down payment, the lower the monthly mortgage payment. With a lower down payment or no down payment at all, you may qualify for zero down payment home loans and/or be required to have private mortgage insurance. If it’s your first time purchasing a home, you may qualify for a first-time home buyer loan.
Expenses can add up quickly. The initial purchase of your home is just the beginning. You need to be able to handle such new expenses as taxes, maintenance, repairs, and insurance. What if the roof springs a leak or pipes break? Insurance covers some of the expense of repairs, but what about that $1,000 deductible? Where will it come from?
You need to be able to juggle these expenses, as well as manage your other goals, such as paying off student loans or the birth of a new baby. Solid budgeting skills are imperative and you need hefty savings for those unexpected crises.
Buying a home is one of the biggest decisions you’ll make. Don’t get in a hurry and make rash decisions. The “perfect” house will come along again and maybe you’ll be in the right position to snap it up.
Need someone to help you decide if you are financially ready to buy? This is an easy decision. Give me a call today and let’s talk it out at 303-845-2409. I’ll help you find a real estate agent, too.
Tricia Houston, Owner
Lending Maven Mortgage
Colorado native and Stapleton resident
You have questions about getting a mortgage, and I have the answers