One of the most important decisions that someone will have to make will come when they decide where to live. When you’re looking for a new place to live, a very important decision you will have to make will be deciding whether you should buy or rent your next home. As you are trying to decide between renting and buying, there are many different important factors that should be taken into consideration.
How Long Do You Want to Live in Same Place?
One of the most important factors to consider when you are deciding what to do is to think about how long you want to live in your next place. If you do not envision living in your community or a certain home for more than a few years it is almost always better to rent your home instead of buying. Purchasing a home can come with a lot of upfront closing costs and other expenses that are hard to offset with price appreciation in just a few years. However, if you plan on staying in your community for a long time, it might make much more sense to purchase in investing in your home as property ownership comes with many different long-term benefits.
You should also carefully consider your personal liquidity position when you are going to purchase a home. When renting a home, you likely will only have to come up with a security deposit and maybe the first month’s rent. However, if you want to purchase your home, the upfront cost can be much more significant. You will likely need to have at least 5% to put down as a down payment and most financial experts would recommend that you put down 20% or more to avoid having to pay PMI. Property owners also need to factor in closing costs, renovation costs, and typical maintenance expenses that are avoided by tenants. If you do not have the personal liquidity to comfortably cover these costs, you may be better off renting and saving for a period of time.
Direction of Housing Market
While a home is a place where you will live for a long time, it is also a big investment that you will want to see appreciate in value. Due to this, you should make sure that you fully understand the current direction of the housing market that you want to buy into. You can learn more about the current direction of the housing market and where it will head by reviewing local and national housing market news periodicals. This could give you a good sense as to whether now is the right time to buy or if it would make more sense to wait a period of time.
Credit History and Score
If you want to purchase a home, you will undoubtedly need to take out a mortgage to finance the purchase of it. To qualify for a mortgage and obtain the lowest overall mortgage rates, you will need to have a good credit score. All people that are thinking of taking out a mortgage should pull their credit score and report at least a few months prior to applying for a loan. This will give you insight into whether you have a good overall score or if your credit needs some improvement. If you have a low score that will not allow you to qualify for a low-interest mortgage, you should consider waiting at least a year and focusing on improving your credit in the meantime. By paying bills on time and paying down revolving debt, you could see a dramatic improvement in your score in a year or less.
Type of Home Availability
You should also consider the type of home that you want to purchase. Depending on where you want to live, you may find that certain types of housing are not abundantly available for rent. If you would like a home with certain characteristics in one market, you may need to purchase it instead of renting.
The process of choosing between renting a home and dying is a very important one. By following the steps, you will be able to clearly determine if renting your next property or investing in buying your home is the better option