Buying a home is typically one of the biggest purchases people will make in their entire lifetime. While we believe there is never a bad time to buy, is home ownership right for you? Most people think the biggest factor for people deciding to buy a home is finances, but is renting really more affordable? If you find it hard to sort through all the differing information or are on the fence about buying your first home, let us help you sort it out! Read on to find out what you need to know before taking the plunge!
How long do you plan to live in the same place?
Our general rule of thumb is if you intend on staying in one place for more than a few years, it could be worth your while to purchase a home, especially in our local market of Centre County! On the other hand, if you know you are going to have to relocate within the next year or two, renting may be the right option. Paying closing costs twice within just a couple years is obviously not preferable, but as we know, sometimes life happens! So don’t worry if you find yourself in this situation. An experienced REALTOR® can always help negotiate a seller assist scenario!
What is the cost of renting vs buying in your area?
If you are familiar with Centre County, you may know that the cost of rent seem to only be going one direction….up! It can be frustrating to feel like you are giving away your money to help build someone else’s fortune when it comes time to pay that monthly rent. However, renters don’t have to worry about the yearly tax bill, and general maintenance of the home, which can add up quickly! And don’t forget the cost of utilities, which may or may not be included in your monthly rent depending on the lease agreement.
While the monthly costs associated with buying a home are very comparable to renting, it is often the upfront costs involved that that tend to scare people away. They find themselves wondering how they will ever save up for that down payment or cover those closing costs. Luckily, there are many different mortgage lending programs out there that can help – there are even some loans that don’t require a down payment at all. And of course, as mentioned before, closing costs can always be an item of the negotiation process. And don’t forget about the tax savings you may qualify for as a homeowner!
According to a report from the National Association of REALTORS®, even with everything we discussed above, a homeowner’s payment will be less than a renter’s after just 3 years. In most areas of the US, real estate will also build equity over time, increasing the overall worth of your purchase down the road.
Are you expecting any major life changes in the next few years?
While the amount of time you plan to stay in one place is a big determining factor here, it’s also important to keep any other major life events in mind as well when it’s time to decide if you want to buy or continue renting. For example, you and your long-term partner may be planning a wedding in the next year or so, it may be wise to figure out how you plan on combining your finances before you purchase a home. Or perhaps your children will be graduating and leaving the nest, so you won’t need as much space as you had in the home you were renting. It’s important to keep these things in mind so that you can really figure out what you want and need in a home, so you can find the best home to fit your lifestyle!
What are the risks of buying vs renting?
It’s important to determine your comfort level with the associated risks of both buying and renting a home, because of course there are risks for both! When you are renting a home, you are essentially at the mercy of your landlord. There is always a risk that they could increase your rent, defer necessary maintenance, or worse, being asked to move out!
When it comes to home ownership, there are some financial risks that come along with it. Sometimes life happens, perhaps you must sell sooner than you had originally planned, which may make it hard to recoup what you spent in closing costs or renovations. Or perhaps you find your roof is failing after only living there a short time. But of course, there are always ways to help manage these risks like home inspections, home warranties, or insurance.
What is your financial situation?
It’s important to have a pretty good grasp on your financial situation when deciding between renting or buying. It’s important to sit down and really estimate the costs and risks associated with renting versus buying to decide what you are comfortable with. Don’t hesitate to reach out to an experienced real estate professional who can consult with you on your specific situation to help you come up with a plan that works for you and reach your goals. And remember, there is nothing wrong with renting a home – it all comes down to what works best for your lifestyle! Renting is always a great way to work on your credit, build your savings for a down payment, and work on managing monthly bills without the risk of home ownership!
