Should I buy a home or continue to rent?
This is the question that keeps coming up every year about this time. As we approach the spring market people get excited and wonder if now is the time to make a move? It can be the right time but there are some things that you want to think about before you jump in to looking for a home.
It's a major investment
True it's probably one of the biggest investments you will ever make so you can't take it lightly. Take time to consider your finances including job stability. Do you feel that the job or career you're in is stable? Will feel your income be going up in the future or the very least staying even? How much debt are you carrying? Will owning the home cost less than rent? In most cases that's exactly what people realize. Between the tax benefits and other incentives in this market rent is almost always higher. There are several different first-time home buyer programs including County bond programs and down payment assistance. These programs are different from city to city and county to county. Check your local area to see what's available.
Currently most lenders require a minimum credit score of 640 to get a loan to buy a home. If you have really good credit typically 720 or above you will also be able to take advantage of the best rates and other incentives. The only way to find out where you stand is to talk to a loan officer. They will walk you through all of this, give your credit score and explain all of the different homebuyer programs that are available to you. They will share with you the type of loan and the interest rate too.
Are you committed?
Are you committed once purchasing a home that you intend to stay there for a minimum of three years? This is about the amount of time it takes to be able to build up some equity, turn around and sell your property to move up to next home. The dream of owning a home is still alive and well in America. And now could still be one of the best times in recent history to become a homeowner.
What's the current market?
The answer to this question varies from city to city so you want to look locally to get the answers. What and interest rates doing right now? Currently they are still at historic lows, which gives you more buying power. For every $10,000 you borrow it will cost you about $35 per month. Where are the property values at? Currently they are still very low. The market has seen a drop on average in the Twin Cities Metro area of about 30% over the last four years. Sooner or later inflation will hit and we will start to see interest rates as well as prices start to climb. We are already seeing some increase in home prices over the last 4 to 6 months.
The big question, continue to rent or buy a home?
Let's take a look at this, if you rent the upside is the only commitment you have is the length of your lease. You don't have the hassle of dealing with the sale of a home in order to move. The downside is that when you make a rental payment you're paying someone else's mortgage. You're investing in that person's future and not your own. At the end of your lease agreement you have nothing to show for it other than that you had a place to live.
The upside of buying a home is you can take advantage of the current market and interest rates. You're working towards investing in your future not someone else's. At retirement when the home is paid off you now have a valuable asset and you don't have to pay rent. The only cost will be taxes, insurance and utilities. With rent that never ends and you still are paying utilities in most cases. The strongest reason to own a home aside from the investment part is, when you retire a big portion of your money will not be going for rent. The downside of owning a house for most people is the maintenance. The nice thing is that problem can be easily solved by purchasing a town home or a condo. Someone is hired to do all of the maintenance, yard work and snow removal for you.
What to do?
Consider your options and try to determine if homeownership is right for you. I think if you analyze all of the different information you will come to the realization that owning a home is the smart thing to do. The biggest question is now the right time to buy? Only you will be able to answer the question. As always I appreciate all of your questions and comments.