When you are ready to make that next step and find a new place, should you buy or rent? It is a fairly common question, and the answer varies from person to person. You must factor in your personal income, assets, credit score, and future goals to determine which option best suits you. It can require a bit of research and self-reflection. These questions will help you develop a better understanding of where you would best fit.
1. How long do you plan to stay?
Here is where your five-year plan comes into play. What do you see changing in the future? In five years, will you still be in the same place? Consider all the big changes you foresee in the next few years, and if your home is the best option. Buying a home is great if you have a stable job and family lifestyle, but renting could be your best option if you need a bit more flexibility. Ask yourself if a home fits into your five-year plan or if it is time to start searching for rental options.
2. What can you comfortably afford?
Use MortgageBite’s mortgage calculator to see how much a mortgage would cost. Many mortgage lenders and loan officers offer a free consultation to review the process and your financial situation. Renting versus buying calculators can give you a comparison between the two options and help you determine what would work best for your budget.
3. How much are the fees?
There are some fees associated with both renting and buying a home. Renters pay security deposits, renters insurance, and utilities while buyers pay broker’s fees, closing costs, appraisals, and insurance. Homes often need at least five years to recover fees and other costs associated with the buying process, and it could just take a few months to recover the fees for renting. The money can add up quickly, and factoring all the fees into your initial budget is important to understand what will work best for you.
4. Are you ready to buy a home?
Buying a home is a big decision. You have to commit yourself to a mortgage and a neighborhood and a school system. The decision is long term, rather than the one-year commitment. Are you ready to take care of the home? Be sure to budget in money for home repairs and updates. Renting offers less commitment and less up-keep than a home, but you can’t personalize a rental as much as you could in a home. Weigh all of the options and really ask yourself if you are ready to commit to a new home.
These questions are a great starting point, but dozens of things to consider before taking the steps towards renting or buying a home. Do your research and make sure you find what is best for you and your finances.