Should I rent or buy? This is the question that a lot of people ask themselves when considering the best way to use their hard earned money. If you are trying to decide whether you should rent or buy a home here are a few things you should take into consideration that will help you with your decision.
1Time in Location
If you are trying to determine whether you should rent or buy a home, ask yourself how long you plan to stay in the area. If you are not going to be in the area that long and plan on eventually relocating, it is probably better to rent considering some of the costs associated with buying a home. Also, if you relocate within a short period of time and real estate is in a down cycle it may be difficult to sell the house.
If you plan on staying in the area for an extended period of time then buying a home is most likely the better option. If you buy a home you can build equity and your money will not disappear into rent and a property that someone else owns.
2Credit Rating
If you have been through some tough times and do not have a great credit score, it may be difficult to obtain a mortgage. Sometimes you can obtain a mortgage with poor credit; however, you will pay ridiculous rates in interest so you actually end up losing money. If your credit is poor it is best to rent and work on cleaning up your credit over time and then go for a mortgage.
3Debt Ratio
How much money do you owe compared to your job salary? If your debt ratio is high due to credit cards and other obligations it may be difficult to obtain a mortgage. Before considering a mortgage take a look at your debt ratio and if it is high, opt to rent while you pay some things off and then apply for a mortgage. You can also pay things down quicker by consolidating your debt if you have multiple obligations.
4Job Stability
Do you consider your job to be secure or are you with a company where layoffs are looming? Perhaps the job you have right now is not exactly what you want and you have taken it to pay the bills while you wait for something else to open up. If you see your job as temporary for whatever reason, it is best to rent until you find the opportunity that you are looking for. The opportunity may present itself in another location so it is best to rent until you are sure you are settled.
5Cash Flow
When considering whether you should rent or buy a home you should consider the money you have coming in versus the payments. When you rent, the landlord may raise the rent without notice, which could cause financial difficulty. If you buy a home you may be able to lock in the mortgage payment instead of leaving it on a sliding scale. This is one of the advantages of making a mortgage payment versus paying rent. You also must factor in the homeowners insurance, property taxes, and maintenance costs plus the expenses incurred at the time of closing.
6Investment Possibility
You should also weigh the possibility of investing versus paying rent. If you pay rent you can take the rest of the money and invest it elsewhere. On the other hand, if you invest in a home real estate is also a pretty sound investment. Even if the real estate market tanks, it always comes back at some point, which is why real estate investors buy real estate during hard times.
7Location
You have heard the old adage that real estate is all about location. Ask yourself what the local market conditions are and the value of real estate in the area where you are thinking about purchasing a home. Compare this to rent conditions in the area and how long you plan to stay. If real estate is valuable in the area you may want to invest instead of rent. If it is not a valuable area you may want to rent for the time being until you settle on where you want to live for an extended period of time.
8Calculate the Costs
If you are planning to move to a new area or you are considering buying a home in the area where you currently live, it is necessary to do your homework to find out if it is cheaper for you to rent or buy in the area.
When you do your research, you will need to look up housing prices in the area to find out which option is the least expensive. When making the calculation, contemplate how long you plan to stay because you need at least three years to get your costs reimbursed and also consider how much you expect the house to appreciate in value.
