We’d like to help you answer the question, “Is it better to buy or rent a home?” Generally speaking, there are obvious benefits to homeownership. For example, The Fed recently issued their Survey of Consumer Finances, in which they observed that homeowners on average have a net worth 36 times higher than that of home renters. From that perspective, the sooner you move into homeownership, the better!
Of course, there are other factors to consider. We’d like you to ask yourself three specific questions in determining whether this is the right time for you to buy a home.
1. Is it affordable? You can get a sense of affordability by examining your debt and income. If you add up your monthly debts (car and phone payments, credit card and utility bills, etc.) plus your projected house payment (monthly insurance, taxes, principle and interest) and then divide that by your gross income, you will get a percentage. In considering you for home financing, most banks will want that percentage to be below 42%. The lower this percentage, the better, as with a wider margin you will be able to save more of your income for emergencies. Another factor to consider regarding affordability is whether you have enough savings to cover the down payment plus the closing costs. While it’s better to have that money on hand, keep in mind there are creative mortgage programs that offer 0% down and 100% financing. We can help you explore those options.
2. How’s my credit? Finding your credit score is easy. There are a lot of credit reporting agencies out there. If you’d like help in choosing a credit agency to work with, contact us and we can introduce you to an agency that will provide a credit check. We can introduce you to a credit lender who will provide a free credit check and help you determine if your credit is healthy enough to make a home purchase.
3. Is the timing right? In considering homeownership, there are personal factors that may make buying a home difficult. For example, if it’s likely you may be moving again in three to five years, it may not be a good time to buy because you probably won’t recoup your closing costs when you resell your new home. But if you’re planning on staying for seven (or more) years, there’s a really good chance that the average annual appreciation is going to overcome your initial closing cost expense and leave you in a good financial position when you resell.
If you have any other questions about renting versus owning a home, or any other questions at all, please feel free to contact us. We offer free consultations and would love to talk to you at (717) 216-0860 or online at dave@hhande.com.
