Seems like everyone is buying a condo or house these days. And there are tons of shows on HGTV about renovating your home making you wonder: should you rent or buy a house? Can you even afford to buy? We’re here to help you make that decision.
Should You Rent Or Buy A House? Ask Yourself These Questions First
1. Do you plan on staying where you’re at for at least three to five years? This is an important question. If you don’t like where you live or may have to relocate for work, why buy a house? If you can’t see yourself spending at least three years in your home, you may not see any growth in your home’s value before you have to sell and move. Can’t envision yourself living in the same home or town for at least five years? You may be better off renting.
2. Have you paid off all your debts? Make sure you’ve paid off all student loans, credit card bills and any other loans before buying a house. You’ll need to show you have a low debt-to-income ratio to qualify for a mortgage. And homeownership is scary at first. The last thing you want to worry about is covering loans, a mortgage and household expenses, too.
3. How’s your credit score? If you plan on taking out a mortgage, a good credit score is essential. Make sure you have the best possible score before you start house hunting. For more info on improving your credit score, check out myFICO.
4. Do you have some savings? You’re going to need a good amount of money set aside to buy a home. You’ll have to put down at least 3% as a down payment. And ideally, you’ll put down 20% to save yourself from having to pay monthly PMI (private mortgage insurance) to cover your lender if you stop paying your mortgage. You’ll also need to show you have enough money put aside in an emergency fund that would cover your mortgage and living expenses for at least three months should you lose your job.
If you’re debt-free, settled in your location and have savings, then you may be ready to be a homeowner. Here are five reasons why it’s better to buy than rent:
1. It’s An Investment
Owning your home or condo is usually a good investment. Every payment you make on your mortgage means you’re one month closer to owning your house free and clear. And then there’s home appreciation. Your home will most likely increase in value over time. What you buy today for $250,000 could sell for $300,000 or more later.
2. Tax Write-Offs
Many homeownership costs are tax-deductible. By the time you write off the allowed deductions, you may pay less for owning your home than if you’d rent it. Here are some home items you can write off or deduct from your taxes:
- Property taxes
- Mortgage interest
- Loan points
- A home office
3. Owning May Be Cheaper Than Renting
Many major U.S. cities are hot right now, making it very expensive to rent. In a hot rental market, it may be cheaper to buy a home, especially if you can live just outside the most sought after zip codes in the area.
Owning your own home gives you a level of privacy you don’t have when you rent. First off, no more landlord on your back. And your neighbors are hopefully removed enough that you don’t hear every little conversation (or their footsteps upstairs at midnight).
5. You Can Renovate!
The best part of owning your home is that you can finally apply all the skills you’ve gained watching HGTV and reading Freshome to renovate your new home. Decorate in whatever style you love. Paint the walls in any color you’d like — it’s your home.