To Buy or To Rent: Answer Your Own Questions

With increased tax incentives and simply the American dream of home ownership, it can be very tempting for individuals and families to want to get into a home of there own as soon as possible. For some, buying a home is the right next step. For others, renting isn’t such a bad deal.

Here are some questions you need to ask yourself and of your family before you make the jump into buying a home or deciding to continue renting where you live:

How Long Will You Live There?
When you rent, you essentially have the freedom to move around at will (in accordance with your rental agreement). When you own a home, the longevity of your stay will be a critical financial decision. Some experts say if you plan to stay at least 4 years or more, it will be worth the time and expense to purchase a home. It may be next to impossible to determine how long you will stay in the area for those with changing jobs or other plans for the future. For those who are more settled in one location because of kids or work commitments, it may be time to start looking to own.

Can We Afford to Move?
Sure you may have enough for the down payment and the monthly mortgage but moving into a home costs a lot of money too. First the expenses of actually moving are substantial. Everything from renting a moving truck, hiring help, or taking off work to pack costs money all at once. Additionally, you will need to consider the other expenses involved like making deposits on utilities, purchasing new household things you don’t already have, and restocking the pantry. There is a lot of little things associated with moving that can add up fast. Plus the excitement of a new place can help sway your judgment when it comes to budgetary concerns.

Is Owning Cheaper than Rent?
People often talk about how much less they are paying on a mortgage each month than friends and family who rent pay but there is a lot more to consider. Besides the interest and principal, there are other costs associated with owning a home such as property taxes and insurance on the house. Experts estimate that no more than 30% of pre-tax income should go toward an all-inclusive house payment (including taxes, interest, insurance, and any homeowner association dues and the like) If your personal financial numbers do not add up for home ownership, it may be best to rent and stash cash for purchase later.

Can I Afford to Maintain a Home?
If you have been accustom to renting for awhile, the responsibilities as a homeowner can be overwhelming and expensive. There are repairs and upkeep that may not have been required as a renter including caring for the lawn, plumbing, and structural issues. You may have to make large-ticket purchases such as lawn mowers or hire professionals to maintain your new home if you are not especially handy around the home.

While these are important questions to ask yourself when debating buying a home, consider also your credit score and other financial responsibilities when making your decision. If your credit is less-than-perfect, you will spend more time and money financing a home. If you can’t answer these questions comfortably, it may be time to stay put, trump up your savings plan, and work on improving your credit scores for another year or two.