If you’re renting a property and are thinking about buying, keep in mind that both renting and buying have their own advantages and drawbacks. What are you willing to give up and what are you hoping to gain in home ownership?
Before choosing to buy, think about a handful of critical questions, like will your career require you to move? Home ownership doesn’t necessarily tie you down forever, but it is a significant investment and takes some effort and attention to detail to sell a home if you need to relocate for career-related reasons.
Do you think you’ll miss the benefits of renting? Upkeep of a home and yard take time. If the roof leaks or the sewer backs up, it’s your obligation to get it fixed. If you’d rather call your landlord to solve problems such as this, you may not be ready to buy. There are other amenities that apartments offer such as swimming pools and workout rooms, secure parking and secure entry systems.
Of course, home ownership provides certain benefits as well. Ask yourself how important items such as having your own yard/garden, the ability to landscape how you choose, having a place to store belongings (such as a garage or workshed) and increasing your living space are.
If you feel pressure to purchase a home because you keep hearing what a buyer’s market it is, keep in mind that the market fluctuates between the buyer and the seller and it will be back in your favor at some point in time. Talk to a real estate agent for advice. The same is true of mortgage rates. Ask yourself if your current income will allow you to purchase the type home you want.
Speaking of income, buying a home can require a good deal of cash to cover the down payment and other closing costs. However, there are a number of creative programs in place for first-time buyers, so even if you don’t have a large savings account, don’t despair.
There are some costs to consider when buying a home:
- Down payment; the amount will vary depending on how much you have and the financing you obtain.
- Closing costs, typically 3 to 6 percent of the home sale price.
- Private mortgage insurance, insurance to cover default on the loan.
- Property taxes.
- Homeowners insurance.
There can be secondary costs as well, such as purchasing appliances and furniture and paying for maintenance and repairs.
The advantages to buying a home include tax breaks that allow homeowners to deduct mortgage interest from their tax return. You’re also saving for the future because each time you make a payment, you build equity in your home, and you have an investment that should increase in value over time.
There are a few major questions to consider. Do you have a steady job history? Most lenders consider a steadily employed person to be someone who has worked consistently for the past two years. Do you have an established and favorable credit profile? Lenders will take a close look at how you’ve handled debt obligations in the past.