You're thinking about moving from an apartment to a house, but you're not sure if you're financially or emotionally prepared. How big a yard do you want, and how will you keep it up? What much of living space do you require? What are the advantages and disadvantages of home ownership versus renting? What are the financial implications, especially when it comes to securing your home and belongings?
While deciding whether to rent or buy a home, here are five questions to ask yourself to help you decide what's best for you.
1. Are you financially prepared to make a purchase?
Saving for a down payment is an important first step toward home ownership. Before applying for a mortgage, you should also evaluate your credit history and possibly pay off any existing debt. If you're just starting out in your profession or have just added a significant number of financial responsibilities, such as a wedding, student loans, or a new automobile, you may need to get your finances in order before purchasing a home. You'll also want to figure out how much it will cost to close on a home if you decide to buy. If you do decide to buy, keep in mind that certain homes insurance policies provide discounts when you bundle multiple policies, such as auto insurance. Make sure to look into this and other possible ways to save money.
2. What is going on in the local real estate market?
Examining the local real estate market might help you identify when it is best to buy vs rent a house. If property prices are rising, you may be motivated to acquire something sooner rather than later before you're priced out of the market. This may include increasing your savings rate and foregoing other significant purchases, such as a new car. Alternatively, you may elect to continue renting for a few years in the hopes that prices would level off or fall. Rising or dropping interest rates can also have an impact on the real estate market, as well as your buy vs. rent decision, because they affect the total amount of your mortgage payment.
3. Do you intend to relocate again?
There are several one-time expenditures associated with purchasing a home. If you want to relocate in a few years, purchasing a property and incurring those fees may not be the greatest financial decision. If you must purchase, consult with your mortgage provider to determine which loan package is best suited to your shorter time horizon. Examine your relocation timeline and how quickly you want to develop equity in your house.
4. Are You Prepared to Take on Homeowner Responsibilities?
While you're still renting, look at the additional costs you'll face as a homeowner. When something breaks in your rental house, you can call your landlord for assistance. When you become a homeowner, you are responsible for all maintenance and repairs. This entails either learning how to fix items around the house or paying someone else to do it. When deciding whether to buy or rent, necessary fees such as homeowners insurance and property taxes should not be disregarded. As a homeowner, you must factor these costs into your monthly housing budget. It's also a good idea to set aside money for substantial home needs like new appliances or major repairs.
5. What Kind of House Do You Desire?
It is also necessary to determine what you can afford and what style of property you require. Is it better to buy a little house now or wait until your family grows and you can afford a larger house later? Looking at the pricing differences between smaller and larger homes, as well as the amount of maintenance necessary for larger yards, can help you decide whether to buy now or wait until you're ready for the house size you desire in the future.
Achieving your dream of house ownership helps you to save for the future while also providing you with a place to call your own. If you believe you are ready to make the transition from renting to purchasing, learning about the costs and additional responsibilities of home ownership may help you build confidence as a possible buyer in the real estate market.