Should I buy or rent?
That is the age old adage. We all need to place our heads somewhere at night so buying a place you can call home can be very enticing.
When deciding “Should I buy or rent” there are many questions that you are going to have to address. Today we are going to discuss several things that you should always consider when making this very important decision. We will go over some common issues that many people face when trying to make this life changing decision.
While renting is mostly a temporary arrangement, buying real estate is often a lifetime commitment. Deciding which one is right for you will depend on a wide range of different factors including location, financial status, and your own personal needs. We have put together a list of things you need to know when faced with renting vs buying. Below are several questions that you should always ask yourself before making any moves.
Do You Have Job Stability?
If the answer is no then you might want to consider renting. While a monthly mortgage might be lower than the price of rent, other money issues should be factored in. Homeowner’s insurance, up-keep, property taxes and homeowners association fees will drive up the cost of living for those who own property.
How Long Do You Plan On Staying In The Home?
Renting is usually on a short term basis. Many people are even on a month to month contract. But if you are planning on staying in the home for more than a few years buying makes better sense. You are not only investing time in the home but you are building an asset each month that you pay your mortgage. Instead of handing that money over to a landlord, you can be investing it in your own property. But if you’re not ready to make the big plunge just yet, there is another option which is rent-to-own. Rent-to-own homes in VA are a popular option that allows people to later buy when they are ready.
Have You Considered The Financial Aspect of Renting?
When you rent a home or an apartment there are three financial amounts that you will need to have in your bank account. The first amount you are going to need is the deposit. Normally, this amount will be equal to one month’s rent. The second and third amounts are the first and last month’s rent. Also, many apartment complexes charge an application fee of around $25.
Have You Considered The Financial Aspect of Buying?
The money you are going to need to purchase a home is going to be significantly higher than renting. A down payment of at least 3% is going to be needed in order to secure a loan. Depending on several factors including your credit history and your buyer status, these factors also affect the amount that you will have to put down. First time home buyers can often get a lower down payment. Your debt to income ratio will also be considered. A debt to income ratio of 43% or lower will need to be achieved in order for you to become qualified for a home loan. Anything higher than that will likely be rejected. Furthermore, annual property tax and home owners insurance will need to be considered before jumping into the market.
What Are The Pros and Cons of Renting?
Renting will allow you to quickly find a place to live for you and your family. You will never have to worry about paying taxes and if anything on the property gets broken because it’s up to the landlord to get it fixed. You can also choose to stay in the home or move to a new location depending on the terms of your lease.
By renting long term you are spending money that you will never see a return on. Owning rental property is great for the landlord but not so great for your investment. Also, you will have very limited control over the home and may be forced to leave if the owners decide to sell the home.
What Are The Pros and Cons of Buying?
Buying a home will put you in total control over the property. As long as you pay your mortgage you will never have to leave. Also, you will be able to change things on the property and improve it in the way you see fit.
Owning property can be expensive and when something breaks it’s up to you to fix it. Also, you will have to pay property taxes which can be very high depending on what part of the state you live. And if you wish to move, selling your home may become an issue and the process can be lengthy.
Now that you know some of the very important things you should consider when you are asking the question “Should I buy or rent,” the decision is yours to make. The questions above will help guide you in the decision making process. Another great tool that will help you figure out whether or not you can afford to buy property is the Bloomberg mortgage calculator. Use this tool to estimate your mortgage amount so that you can compare the amount to your income and other monthly bills. Don’t rush and take the time to carefully go over this article before making any decision.