The thought of owning a house, and having a place you can truly call your own, is appealing for obvious reasons. However, choosing to be a homeowner takes not only a decent level of financial stability, but also a certain emotional maturity that’s needed to create time-constrained plan that suits your budget and lifestyle. If you’re feeling stuck on the fence between renting and buying, here are some important questions to ask yourself…
What Are the Prices and Rental Rates in Your Area?
It’s easy enough to stack rental rates against each other, but when you’re looking into buying a home, you not only need to think about your mortgage payments, but also property taxes, homeowner’s insurance, and possibly some extras like homeowner or condo association fees. In many cases, it’s much more expensive to rent than to buy, especially when mortgage rates are fairly low. Even if the mortgage rates in your area aren’t all that attractive, it’s important to consider the wealth-building benefits of owning a home which can keep giving over time. Median net worth for homeowners is significantly higher than those of non home-owners, thanks to the way your equity increases as you pay off your home loan.
Are You Really Ready to Own a Home?
One of the primary benefits of renting over buying is that you’re not tied down to anything. Check out some houses for rent websites, and you’ll see dozens of options for homes that you may want to live in, though don’t want to fully commit to. When buying, things get a little more difficult. Not only is the variety of choice generally more limited, but you have to find a home and an area where you’d be happy to live for several years, all the while recouping the cost of buying property and building up your equity. Take some time to consider whether you’re really ready to tie yourself down to such a big obligation.
What’s Your Five-Year Plan?
It’s impossible to tell for certain what’s going to happen in your future. However, assuming that everything goes according to plan, you need to think about how renting or buying will mesh with your long-term strategy. If your plans for the future include a major career change, or moving to another state, then you’re generally better off renting. If you’re planning to settle down and have kids, you’re better off buying, and incorporating the cost of raising a family into your budget.
How’s your Credit?
If you’re out of touch with your credit, then you’re really in no position to think about renting or buying. Get a free credit report from the federal credit report website, and comb through for any kind of errors and negative information in it. You can also get your credit score for a small fee. Many home creditors will want to see a score of at least 620, but this could be much higher for government-sponsored loan programs. It may be worth renting and working on your credit score before you think about buying.