To buy or not to buy? That is the question. Well, it’s one question that many of us ask. When deciding whether to rent or buy, there are some super important factors to consider. Buying a home is a huge life decision and, as such, shouldn’t be taken lightly. Not to mention, moving is a pain in the you-know-what, so it’s best to make a decision that’s going to suit you for the long haul. There are online tools like you can use such as the Rent vs. Buy tool, or you can dig a bit deeper. The biggest factor is obviously money, so if you’re wondering what the true cost of renting versus buying a home is, read on.
Make Sure You’ll Qualify
You might be asking yourself, “Am I worthy?” We joke, but buying a home does beg the question of whether you can actually do that considering your background. Have you checked your credit recently? MySmartMove allows for tenant checks that won’t hurt your credit. And when it comes down to it, you’ll need good credit to rent or buy, so this is a necessity. If you discover a less than stellar score, there are things you can do to clean up your credit. Consider getting a loan to pay off credit cards (but leave these credit cards open to improve your score). Make sure you pay your bills on time and don’t move credit card balances around to other cards, as this won’t help you to improve your credit score.
You’ll need to find out where you stand in getting a loan. Consider trying to get pre-qualified. Getting pre-approved means the lender gives you a firm commitment to loan you up to a certain amount without a specific property being named. This can expedite the home-buying process, helping to exclude time as something that could jeopardize the offer going through.
Assess the Market
There are a lot of long-term benefits to buying a home, such as increased equity, tax breaks, and the fact that real estate is generally considered to be one of the soundest investments you can make. However, you obviously don’t want to buy at the top of the market. If this is the case, you might consider renting until it’s a better buyer’s market. You want to be in a position in which you can wait out the market until you can get a good deal. If you’re not sure about this, consider seeking the help of a financial specialist.
Ask Yourself If You Can Afford Buying a Home
This goes beyond the initial qualifying process we discussed above. There are plenty of other home costs once you move in, especially if you live in an older house or a fixer-upper. As this article from Investopedia notes, “Many financial experts suggest that your monthly mortgage payment not exceed 28% of your gross monthly income and that your total monthly debt payments not exceed 36% of your gross monthly income.” Going beyond your means in this regard could spell disaster, especially if you get on a streak where several things break down at once. Home repair costs can be devastating unless you have planned—or at least partially planned—for them.
Assess Where You Are in Life
Are you living where you want to be? Do you have kids and, if so, is this where you want them to go to school and grow up? You could be in a situation that requires you to be in a city that you don’t love but your job mandates this. If this is the case, you might consider renting until your current job—or a new one—can take you elsewhere. Moving is hard enough on adults, but when kids have to change schools, it can be an extremely difficult adjustment. Plus, those in the financial world will tell you that if you don’t stay in a home for at least three years, you likely won’t even breakeven on the closing expenses incurred during the buying process.
Now that you know the true cost of renting vs. buying, what are you going to do? Either way, finding a place to call “home” is surely bound to be an adventure.