According to a recent Pew Research Center analysis of data from the Census Bureau, more US households are headed by renters than at any point over the last 5 decades. Buying a home is something most people strive for, however people in their 20’s & 30’s are having a harder time making the financial commitment. Here are some items you should consider, before deciding if it’s time to buy.
How long are you planning to stay?
How long you intend to stay in a particular area could have a huge impact on your decision to rent or buy. If you’re the type of person that likes to jump around to different towns and change jobs often, buying a home might not be for you. The longer you stay in a home, the longer you have for your home appreciates, and your mortgage debt is being paid down.
Does it make sense financially?
Buying a home requires a large initial investment. Closing costs will be approximately 2 to 5% of the purchase price. That’s on top of your down payment, which most lenders require 20% down to avoid private mortgage insurance. Don’t forget property taxes, homeowner’s insurance and escrow costs. If you feel comfortable with all the initial and ongoing costs, then it may be time to start looking for your future home.
Do your research. Housing markets affect whether it’s best to rent or buy. Depending on the area, sky-high rent prices or over priced homes may be the deciding factor. Review your finances and decide how much you’re comfortable with paying each month and determine which is best for your situation.
How’s your credit score?
Run your credit score and see where you fall. Your credit will determine what interest rate you will get on a home loan. If your credit isn’t great, it may be a good idea to rent and work on improving your score. Paying down any debt, paying your bills on time, and ensuring your credit report information is accurate are all ways to help improve your score.
It’s not all about finances
Are you the type of person that can handle repairs around the house? Do you enjoy decorating, painting and updating? Then perhaps, owning a home is for you. Or do you prefer to have everything taken care of for you? Or maybe you want a bunch of amenities such as a pool and gym – it may make sense to rent.
Buying a home is likely the biggest financial decision you’ll make. You don’t want to be house poor; make sure you do your research and feel comfortable with all the expenses associated with a new home.
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