Deciding whether to buy or rent a home can be a difficult decision, especially for first-time homebuyers. With the current state of the housing market, it can be even more challenging to determine the best time to start exploring homeownership. In this post, we’ll examine five questions to ask yourself before purchasing your first home.
1. How long do I plan to stay in the home?
Owning a property for at least five years provides the most financial benefit, and the longer you own the property, the more you are likely to benefit from its appreciation. If you plan to sell the property in a shorter period of time, a home purchase may not be the best choice for you. There are costs associated with buying and selling a home, and it may take time for the property’s value to rise enough to offset those expenditures.
2. Is it a better value to buy or rent in my area?
Consider whether buying or renting is a better bargain in your area if you know you plan to stay put for at least five years. The price-to-rent ratio is a helpful tool for evaluating your options, but it provides only a snapshot of where the market stands today. Homeowners who purchased a single-family existing home ten years ago would have gained roughly $225,000 in equity, while someone who chose to rent during that time would have missed out on those equity gains and seen rental prices increase by around 66%.
3. Can I afford to be a homeowner?
Evaluate your financial readiness to be a homeowner. Consider your savings and whether you will still have enough money left over for ancillary expenses and emergencies after committing to a down payment and closing costs. Additionally, factor in property taxes, insurance, association fees, maintenance, and repairs when evaluating your monthly budget. Still, you could find that the monthly cost of homeownership is comparable to renting, especially if you make a sizable down payment. Landlords often pass the extra costs of homeowning onto tenants, so it’s not always the cheaper option.
4. Can I qualify for a mortgage?
Look into how likely you are to get approved for a mortgage. Every lender will have its own criteria, but in general, they will scrutinize your job stability, credit history, and savings to ensure you can handle a monthly mortgage payment. It’s always a good idea to get preapproved for a mortgage before you start house hunting. Let us know if you’re interested, and we’ll give you a referral to a loan officer or mortgage broker who can help.
5. How would owning a home change my life?
Consider how homeownership would affect your life aside from long-term financial gains. Owning a home involves more time and energy than renting, with more upkeep and potentially more DIY projects. On the other hand, owning a home provides more freedom to make the space your own.
Purchasing your first home requires careful consideration. By asking yourself these five questions and reaching out for a personalized consultation, you can compare your options using real-time local market data and identify actionable steps you can take now to reach your long-term goals.
The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.
- CNN –
- NPR – https://www.npr.org/2022/07/14/1109345201/theres-a-massive-housing-shortage-across-the-u-s-heres-how-bad-it-is-where-you-l
- Bankrate –
- Federal Reserve Bank of St. Louis –
- National Association of REALTORS – https://www.nar.realtor/blogs/economists-outlook/price-to-rent-ratios-by-state-from-2014-2019
- National Association of REALTORS –
- Statista –