TO RENT OR TO BUY? THAT IS THE QUESTION!
Have you had your eye on what looks like the “perfect home for you”? And, now it has a “For Sale” sign in the front yard. Are you asking yourself, “Am I ready to stop renting an apartment and buy that home?” and “How do I know it’s the right thing for me?” and “How do I get started?” Those are great questions and the answers may not be as obvious as you would think. Let’s look at some of the considerations involved in renting vs. buying.
Where are you in your professional and personal life? Do you need to maintain the flexibility to relocate to another city or state? If so, you may need to continue renting. You can leave when necessary and you do not need to sell a home. If, however, you feel that you are going to be in one area for a while, home ownership may be a good option for you.
Are you ready to take on the responsibility of cleaning a larger home, doing yard work, and maintaining a home and paying for it? Or do you like the convenience of having your landlord do those things for you at his/her cost? Remember, renters may have to wait for a landlord to make those repairs which offsets the convenience factor. You still must clean the apartment.
Are you well-positioned financially? If you have managed to avoid a lot of debt, or to pay off some debt, you may be ready to take on the financial responsibilities of owning a home. Lenders look at a variety of things when considering a home loan for you. They will consider your debt ratios – for instance, what percentage of your pre-tax income would a mortgage, insurance, and property taxes be? And, when you add in other debt, what percentage would that be? What is your credit score? Do you have money saved, or the ability to borrow from a retirement plan, or other resources for some possible upfront costs? These are just some of the things that lenders will consider. Lenders can tell you about loan programs that are available and the best match for you. They can help you think creatively about down payments, closing costs, and other home ownership considerations.
Will a house payment exceed my apartment rent? As always, the answer is, “It depends.” One recent example in Rocky Mount compared a 3 BR/2 bath, 1000 sq. ft apartment with a rent of $900/month to a 3BR/2bath, 1,500 sq. ft. home selling at about $125,000 with a total house payment including taxes and insurance at $896 (3% down payment, 4.5% interest, 30-year fixed rate). In this scenario, the monthly rent and the total house payment were almost the same. “It depends” on the characteristics, loan terms, price of the home you choose vs. the apartment you can get.
What are some advantages of home ownership over renting? Rent can be increased while fixed rate house payments will remain the same throughout the loan. Rent payments help a landlord buy a property and allow you to live on someone else’s property for another month while house payments are helping you build equity in a property that is yours and that you can borrow against or use later to purchase your next home. Renters cannot generally make improvements or customize an apartment. Homeowners can renovate, change, or improve their home to suit them.
If you have decided to purchase a home, how do you get started? First, choose a real estate broker. That person is a professional who can guide you through the process of identifying a lender to get you pre-qualified, searching for a home, negotiating with a seller, and getting you through closing.
If you are thinking about buying a home, have questions, or need more information, please call me at
Moorefield Real Estate