ingrid.homes

Rent versus Buy

Should you rent or should you buy? That’s an interesting question in this market. Rents are going sky-high but so are home prices. Couple that with inflation, and housing just seems to become unaffordable along with all the other necessities of life.

Here are some good questions to ask yourself when considering whether to buy or rent:

Are you in a stable job with an income you can reasonably count on?A mortgage is generally a 30-year commitment that you can only get out of by selling the home. Renting offers a lot of flexibility.

Do you have savings for downpayment and closing costs? Renting will require a security deposit and application fee. Purchasing will be a 3-20% downpayment as well as closing costs and pre-paid items (these run 2-5% of the amount of the mortgage). So, if you’re purchasing a $300,000 first-time home with an FHA loan, you can expect to spend $17,000 to $20,000.

Do you expect to live in the home for 3 to 5 years minimum? There are some breakeven points as you recoup the closing cost expenses as well as possible tax ramifications for staying in a purchase for a short amount of time.

Do you have enough income to keep up with home maintenance? Home maintenance is 1-4% of the home’s value. So using our $300,000 home, you could be paying between $3000-$12,000 a year to maintain and repair.

Do you know your credit score and can you qualify for a mortgage? Lenders look at all three credit agencies when deciding to lend you money. Some lending programs have more lenient guidelines than other lenders, but generally, the higher your score, the better your interest rate will be. Along with your credit score, lenders will look at your debts and income.

I’m a Realtor, so of course, I’m going to recommend you purchase a home, even in a crazy market like this one where rents are often higher than a mortgage payment might be. Homeownership has always been a path to wealth creation in our country –  and still is. Along with more stability for you and your family, owning a home is a forced savings program, especially in a market where prices are rising. Your monthly principal payment is akin to putting money in the bank. This, along with tax incentives does give you a financial advantage. And rents will always continue to rise – once you have a mortgage, your payment stays the same for the life of that mortgage.

A great resource is this rent vs own calculator on the website Nerd Wallet. It factors in a lot of the details I mentioned above and gives you some real numbers to think about.

And the one additional item I haven’t mentioned is the home is yours. You can paint a crazy color, put garden gnomes in the yard, make modifications that suit you, and not be in trouble with the landlord. If you answer yes to the questions above, let’s talk about how to make it possible for you!

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Calculator, pen, documents, text that says, "What is Private Mortgage Insurance?"

What is Private Mortgage Insurance or PMI?

When a buyer makes a down payment of less than 20%, the lender considers the buyer a higher risk. Private Mortgage Insurance (PMI) protects the lender in case the buyer stops paying the mortgage.