It’s one of those major questions you’re bound to ask yourself at some point and probably the biggest decision from a financial standpoint you’re going to make. The answer though isn’t always a simple one, there are a variety of factors to take into consideration. Ultimately, your decision will be based on what makes the most financial as well as emotional sense for your particular situation.
There is a general belief that owning a home is the ultimate goal, the key to the “American Dream.” And while there are many great reasons to support this thinking, numerous pros and cons should be weighed before signing on the dotted line. And regardless of whether you’re a first time home buyer or a repeat purchaser, be sure to ask yourself a few important questions before contacting a real estate agent to get started.
Thinking about buying, consider the following…
- Building equity over time which creates stability and security for your family
- Tax benefits – great news, now you can deduct many home-related expenses
- Potential for rental income
- More creative freedom – you won’t need to ask anyone’s permission (well maybe your spouse) before tackling a new project
- Unlimited pets (if you want) – there isn’t a no pet policy when you own your own home
- Potential for financial loss
- Responsible for all maintenance and repairs
- Higher upfront costs
- You’re not responsible for maintenance and repairs
- No real estate taxes to pay
- No large down payment
- Credit requirements are less strict
- Some utilities might be included in the rental agreement
- Relocating is easier
- No chance to earn equity on your property
- No tax benefits
- Limited housing security
- Down payment
- Home appraisal fee
- Home inspection fee
- Property tax
- 1st years homeowners insurance
- Any additional closing cost fees
- Mortgage loan payments
- Property taxes
- Homeowners insurance
- Private Mortgage Insurance (PMI) – if you put down less than 20% of the purchase price you’ll have this added monthly payment
- Security Deposit
- First month’s rent
- Moving Costs
- Monthly rent
- Renter’s insurance
- Utilities (sometimes, certain utilities are included in the rental fee)
- Laundry (not all rentals offer washer/dryer hookups)
As you’re going down your checklist, consider the following questions…
- How long do you plan to stay? – The longer you anticipate you’ll be there the better off you are buying. Buying and selling a home requires a good deal of time and money so take that into consideration if you plan to stay less than five years.
- Would you be happy staying longer than planned? – For first time home buyers, the idea of a starter home sounds great, but what if the time comes when you’re ready to sell and it’s not a sellers’ market? Or other unforeseen circumstances arise and you are unable to move when you thought you would?
- How stable is your job and your life? – If things both professionally and personally are not stable you might want to reconsider locking yourself into a big financial commitment at the moment.
- How do the monthly costs compare? – Do the math and be realistic. Consider all of the monthly costs that go along with owning verse renting.
- Do you have enough money for a down payment? – Sure you can get away with putting down less than 20% but that means you’ll be paying PMI along with a higher mortgage payment. Plus, sellers might choose offers with higher down payments and less contingencies.
- Do you have savings to pay for repairs? – All homes require repairs at some point, regardless of whether they’re brand new or not. If you’re leaning towards purchasing make sure you have some extra cash in your account for any unforeseen occurrences.
Whatever route you choose, finding the best real estate agent will help make either process as smooth and efficient as possible.