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How to Know Whether to Buy or Rent a HomeDeciding whether to rent or buy a home is one of the most important decisions you'll make, and it will also be one of the most difficult. A home purchase is a major financial and personal consideration that requires a massive investment of capital as well as time, energy, and knowledge. Renting, at first glance, can appear as a simpler alternative. But which is the right choice? If you're considering becoming a first time home buyer and you've always rented in the past, there are a few things you need to consider before deciding to become a homeowner. Do you have a strong credit score? Is your credit score high? Then there is a strong possibility that you will be able to successfully save money and build equity by owning a home. One of the primary advantages to home ownership, of course, is that it gives you a vehicle through which to gain equity. But owning a home also comes with expenses, and if you aren't able to get the lowest mortgage rates on your home loan, your interest costs and other expenses will outweigh the equity you are saving up each year. Because mortgage rates are heavily based on your credit score, it's important that you have a high credit score before you consider owning a home. Do you have other significant debts? Many people have successfully purchased and owned homes while still carrying other major debt loads, such as student loans and several car loans. But these other debts can put a major strain on your monthly income once you begin working to pay off your largest debt of all, your home mortgage. Make sure you can afford to take on additional debt before you buy. More importantly, most lenders won't provide the best loan rates and terms to buyers who have significant preexisting debt. It's best to pay off some of your current debt and stabilize your financial situation before you buy. Do you plan to live in the area for at least 5 years? Owning a home requires some degree of lifestyle stability. When you own a home, you can't simply give 30 days notice that you intend to leave and then start looking for a new place. It can take months and even years to sell or buy a home, meaning that you aren't able to react as swiftly if you need to leave your current area and move somewhere else. Before you decide to buy a home, make sure you are planning on living in the area for a significant length of time. Most experts recommend that you don't try to sell your home and move for at least 5 years. Are you willing to deal with maintenance? Homes require regular upkeep and maintenance. Are you willing to address these issues? Many individuals who have lived for years in apartments and condos with property management companies handling all maintenance are unfamiliar with the regular upkeep work that must be done and, more importantly, simply aren't interested in making it part of their lifestyles. This is fine. But it means you'll probably prefer renting, in the long run, to owning a home. |
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