I'm not going to sugar coat this and say “Yes, you need to buy today!"… yada, yada, yada…” and the reason is honestly its not always the best thing to do. I am going to break it down and be very honest with you, your situation is yours, while the next person has their own situation and not everyone is better off buying vs renting.
4 questions that only YOU can answer
that will determine if you should buy now or keep renting.
Can you qualify for a loan? Meaning, do you have a Stable Income? Is your credit score somewhere in the 600's? A lower credit does not mean you cant be qualified, but it does mean you may pay a little higher interest rate so depending on the rate you get with your credit score, will depend if it makes sense to buy now or wait until you can get your score up.
The next question goes along with question #1, however it usually always raises so many eyebrows and this is where most first time home buyers lose all confidence and just think home ownership is impossible, and the reason most of them feel this way is because I see all these “gurus” say “if you don’t have 20% down or cant afford to fix a toilet if it breaks, this and that, just keep renting"… you know who says these things and is writing all that nonsense? The landlords your currently renting from!
FACTS are, only 10-20% of Americans have a solid savings account with the average of $17,000 - so does that mean the other 80-90% of us cant buy? NOPE!
Yes, the 2 most expensive things you need to be prepared to pay for are the down payment and the closing cost, but if the down payment is an issue, go with a 100% finance option. If closing cost are an issue, ask the seller or the lender to pay them for you! If you can get these two things covered, you will pay less to buy a house than you would in deposits to rent a house. Basically I am asking with this 2nd question is, do you have some money to work with? While you need to have some money its probably not as much as you may think you need.
Do you plan to stay in your area at least 3 years? The reason I use the 3 year mark as my “time buffer” is while a house can be your biggest asset, buying and selling any real estate can be costly, however the longer you own the home, the more money you can recoup when you sell it, and you typically can start seeing your house asset grow the most by year 3 therefore buying today and selling a year later – could end up costing you more money and we don’t want that.
If your not planning to stay around the area for at least 3 years, keep renting. THE ONLY REASON I would suggest otherwise, would be if your income can hold two mortgages, then you could keep the house as a rental property for when you move out of the area and buy a house at the new location. With this, you become a landlord so you want to be open to this option.
Are you willing to commit? Buying a home, is kind of like having a child, think of your closing day as the day you had your first child. Your committing to take care of the house, pay your payments, love it & nurture it. Owning a home has a little more responsibilities that go with it vs renting – mowing the lawn is kind of like changing a diaper at 2am, but man its so rewarding to have your own little spot on the map that’s yours just like the first day you child calls you mom or dad.
So, How Did You Do?
If you answered NO to any of these 4 questions – keep renting. Your not ready to buy right now & that is okay.
If you answered YES to these 4 questions, then home ownership at this point in your life should be your #1 goal. The fact is, being your reading this blog & researching already speaks volumes and I guarantee you, your goals are not far away!
Think about this, your already paying a mortgage, its just not yours. Every month you make that rent payment, your paying down what your landlord owes on his loan, not your own loan. YES, in the beginning huge chunks of what you pay will go toward interest, much like when you finance a car, but after you hit the 3 year stretch, it’s all up from there.
What I am about to tell you may sting a little, so brace yourself….
Think about how long you have been renting… lets say 2 years, now lets say in that 2 years, you have paid $1,000 per month - that’s a whopping 24,000! Ya'll, that’s a chunk of money, imagine if that $24,000 went toward your loan... OUCH!
Now, on a brighter note - lets not look back, lets look forward and look at the PROS & CONS on RENTING vs OWNING:
Your not investing for yourself / your family
You can't paint/decorate how you want and if you can, odds are you have to put it back the way you originally rented it.
Most rentals don’t like the fur babies, and if they are allowed your going to pay a nice premium to have them.
Your landlord could one day decide they don’t want to landlord anymore and sell the house, OR raise your rent leaving you unstable year after year.
If you have to sell in a down market, you could face a loss – (TIP: don’t EVER sell in a down market, if you need to move, rent it out until the market comes back up – then sell).
Your responsible for all maintenance and repairs – (TIP: get a home warranty, the home warranties are an amazing value that can cover large appliances, and bigger cost items and you usually pay this warranty once per year and the average annual cost is $400).
More flexibility to pick up and move
Minimal cost for repairs
Less financial risk
Fixed monthly payment
Financial security for your future (borrow against the money you already paid, in an emergency situation)
Tax benefits (write off mortgage interest payments that you paid in the year)
Potential to earn rental income (house with basement/extra bedrooms)
Your home, Your rules: pets and decor decisions - are all yours
Crap happens - Most mortgage companies give you a 14 day “grace period” before charging a late fee. Most rental properties, if you don’t have the rent paid by the 14th of the month, your well over any "grace period", and odds are you have eviction papers in front of you with some really nasty letters.
While owning a home is not for everyone, I hope this helped give some clarity on the facts of buying vs renting & you are now one step closer to the goals you want to achieve. My goal is to help you achieve all of your goals in life & in real estate so be sure to check out my other blogs and resources to help you, or please share this content with someone if you think it could help them. Until the next one, stay blessed!
Melissa English is a Real Estate Agent and Investor in the North Georgia market with hundreds of closed transactions and nearly a decade of experience in real
estate. She is also the founder of GeorgiaKey.com - a real estate investing company that specializes in purchasing property offering quick closings in as-is condition.