Not sure whether renting or buying makes the best sense for you. There is plenty to consider and go over. The 2 are entirely different, and they have their both pros and cons. Buying will always carry more risk and there is much more responsibility involved. However, it also does have its bonuses. You can reap the value of healthy asset increases. Nobody is going to look out for you more than yourself. So before you go out and make a purchasing decision, absorb some of the following topics that can help you along your way.
Your Financial Outlook
Think about your job and your income. When you buy a home, you need to be thinking long and hard about your personal financial position. You want to have enough money in savings to make your mortgage payment if you find yourself out of work. If you ask a professional, they will say you need many many months of savings. The more the better. But even a better question to assess is how skilled of individual are you? Are your job skills in high demand? If they are, then even if you do lose your job, you won’t be out of work for long. If your skills are obsolete, then you might want to reconsider a purchase. If you pay for your new home in cash, then you will only be responsible for property taxes and any HOA fees. This puts you in a very favorable decision.
How often do You Move
A home purchase is more geared for someone who is planning to stay in place for an extended period of time. You know your situation better than anybody. If your employer moves it’s employees around a lot, then renting might be the better option. Buying and selling a home usually doesn’t happen overnight. There are inspections, the need to find a buyer, plus many other circumstances which prolong a home sale. If you find yourself needing to sell fast, then this can put you in a position of weakness.
However there are mortgages in today’s environment that are aimed towards buyers who tend to move a lot. These are called adjustable rate mortgages, The rates on these types of financial contracts are not fixed. So your monthly payments can change. Here is a cool adjustable rate mortgage calculator you can use.
Renting has its own set of alternatives that deserve your consideration
Leave When You Like
When you rent, you can move whenever you like. Almost all leases have a clause that allows you to terminate the lease early. Although you may be required to pay a month of rent or two, that’s much easier than trying to exit a mortgage. Many potential people aren’t fond of renting because they think about living in an apartment. Yes, they don’t possess the square footage and privacy that homes do. But remember, you can also rent a home.
A Word on Property Tax and HOA Fees
When you rent you won’t have to pay these latter two fees. All owners must pay their property taxes. Depending on the state you live in will dictated what rate you pay. States like New Jersey and Texas have some of the highest rates in the country. Property taxes do tend to go up over time.
Be careful when you move into a community with HOA fees. First off, find out what they cover. Next do some due diligence. HOA fees also tend to go up over time. If you watch your pennies, then an HOA is probably not for you. You won’t have a say on certain repairs and there are other costs that you won’t pay when you purchase a non HOA home.
As a renter, you won’t be directly responsible for these. Although the owner may pass some of these costs to you in the form of rent, you can always move.
Rental Pricing of Popular Cities
A good comparison is to check the city you live in and view the average rates for apartment and private home rentals. You can gain rental reports online for many different cities. A good example can be found here.
Remember that pricing of rentals does and can change on a yearly basis. Then you can use this data in your purchasing decision. Pricing doesn’t include other fees like security deposits, pet fees, and other miscellaneous costs.
Avoiding the High Investment Cost for Buyers
Unless you are able to secure an interest only mortgage, or one that allows you to put very little down, you will need to come up with a substantial downpayment. Many professionals recommend somewhere between 10-20 percent. That can be a drain on your bank account. If you need to divert funds to other sources, renting might be perfect for you. Here are FHA loan requirements for people who have lower to moderate income levels.
Have you considered owning investment property. This can be a great way to own property and make money at the same time. Why have a mortgage when you can have someone else pay it for you!