When Is it Time to Purchase a Home?

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Pros and Cons of House Buying and Renting

It is a question that most people confront sooner or later: When is it time to purchase a home?

Buying a home and renting both have their advantages and disadvantages. This article will take a close look at both sides of the rent vs. buy decision to hopefully help you to make the decision best for you.

There is a strong case to be made to become a homeowner in 2018 with record-low interest rates, tax deductions and aggressive mortgage lending programs across the country.

buy a home vs renting

Current Housing Overview 

There is no doubt that going from renting to buying is a major financial step. It is not only a serious change of lifestyle, in terms of setting down firm roots in a certain neighborhood. It also takes a down payment, good credit and a plan to stay in that house long enough for it to make financial sense.

Generally, Americans from 18-39 are in favor of owning; ¾ in a recent Fannie Mae National Housing Survey stated that owning is better than renting because it is a good investment in many cases. But this is only true for those who are in a financially stable enough position to buy. People who buy homes before they are ready….that is in part what led to the financial crash of a decade ago.

Renting in Today’s Market

For some people, renting can feel like tossing away money every month. ‘Why should I pay for someone else’s mortgage when I can pay my own?’ goes the argument.

But it does not follow logically that every American and American family should buy a home. Renting does come with certain advantages that work well for some people. Consider:

  • At the end of the lease period, you have the option of moving to another area of town or even another city if you like. Also, you can decide to put your belongings into storage and travel the world, if you are in a position in life to do that.
  • You do not generally have to worry about home maintenance when you are renting a home. If something breaks, you call the landlord or property manager and they fix it.
  • You only are locked into living in the home until the lease period is up. Worst case, if you break the lease, you might be out a penalty and your security deposit.
  • Renting does not come with a major financial commitment. You basically need to pay the month’s rent and a security deposit, which is typically a month’s rent for most people.

Renting of course does have down sides. You really are paying for someone else’s mortgage. Forget about making any modifications to the home, unless you are prepared to change the home back at the end of your lease.

Also, moving from house to house every few years gives you less stability and you are not as likely to get to know your neighbors. Read about new rent to own home loans options.

new home buying 2017

Home Buying Considerations in 2018 and 2019

Buying a home by definition has less flexibility than renting.

Buying your own home is a complex process that takes time and money.This also is the case when you sell your home.

You also will need to pay closing costs and a commission to a real estate agent.If you need to move to another area of town or another city, you are going to have to sell that home.

Unless that is, you are able to afford carrying the mortgage on the property in addition to the one where you will be living. You also can rent out your current home, but that comes with its own costs and stresses.

How to Save for a Home Loan Down-Payment

Buying a home generally only makes sense if you are going to stay in the home for at least five years, many financial experts say. It is unlikely that you will be able to see enough appreciation in fewer than five years to make owning a home worth it.

Buying your own home also takes a good sized down payment. While you do not need to have 20% down, the more the better. There are home loans out there today from FHA and Fannie Mae and Freddie Mac that allow you to make as low as a 3.5% down payment.

2018 First Time Home Buyer Programs:

Top Zero-Down Home Loans:

But buying your home in 2017 also does come with many advantages:

  • You will enjoy a buildup of equity and appreciation over time. This is a major way that Americans are able to grow wealth. You also can borrow some of that equity with a HELOC or an equity home loan.
  • You can make modifications to the home, within the guidelines of your homeowner’s association. And you certainly can rehab the inside of the house as you see fit.
  • You will have more stability and most likely be staying in that community for years. This can be beneficial for people who are raising a family. Most of us do not want to be moving between houses when raising children.

good time to buy a home

Should You Rent or Buy?

As the above information shows, this is not an easy question to answer. But here are the bottom line questions to ask yourself if you should buy a home:

  • How long will you be in the house? The longer you want to stay put, the more sense it makes to buy.
  • Would you feel ok if you did have to stay in the home for many years? What if the market crashes again and you owe more on the home is worth? This can happen, as the last crash illustrated all too well for many families.
  • How stable is your life and job? If you feel good about where you are going career wise as well as where you are situated, buying can be logical.
  • Can you document your income? Most banks and lenders will require you to document your income. If you can you will need to find a no doc mortgage.
  • What are the costs each month to own vs. rent? Figure out what it costs you to rent and what it really costs to own. Figure out property taxes, insurance, maintenance and so forth. You will often pay more in rent than you have to pay for your mortgage, but when you own, you have to pay for maintenance. And things such as roofs? They don’t come cheap!
  • Do you have the savings to make repairs as needed?
  • Would you be better off investing the money for the down payment? This depends upon what you invest in and what the potential appreciation is of the home you are going to buy.

When you consider all of these factors and information, you should be able to get a good idea if buying or renting is best for you at this time.

References: Should You Rent or Buy? 7 Questions to Help You Decide. (2014, Oct. 10). Retrieved from https://money.usnews.com/money/personal-finance/articles/2014/10/10/should-you-rent-or-buy-7-questions-to-help-you-decide also, $ Reasons Fewer Americans Are Buying Homes . (2017, Sept. 11). – https://www.fool.com/mortgages/2017/09/11/4-reasons-fewer-americans-are-buying-homes.aspx and Infographoic from NAR https://www.nar.realtor/research-and-statistics/homeownership-opportunities-and-market-experience-survey