The decision to buy or rent is one of the biggest financial investments you’ll ever make.
While many consumers believe buying a home is a good decision, it’s not always easy to know when the time is right to take the leap.
Choosing to become a homeowner takes not only a financial commitment but also the emotional maturity; it needs to suits your lifestyle and your budget.
1. How Do Home Prices and Rents Compare in Your Community?
While it’s easy to compare rental prices, when you look at the cost of buying a home you need to include not only your mortgage principal and interest payments, but also homeowners insurance, property taxes and possibly a condominium or homeowner association fee.
2. Are You Emotionally Ready To Buy A Home?
One of the benefits of renting an apartment is that you typically only commit to a lease for one year. If you’re buying a home, you’ll need to choose a neighborhood and a home where you want to live for the next several years while you recoup the cost of buying and build equity.
3. Do You Have a Five-Year Plan?
While no one knows with absolute certainty what will happen over the next five or 10 years, if your plans include switching careers or moving out of state, you’re probably better off renting. If you plan to start a family in the next few years, you should take that into consideration when developing a budget.
4. Are You Ready to Take Care of a Home?
Along with the joy of decorating your home and changing it to meet your needs, you need to budget at least 1 to 3 percent of the home price each year for repairs. Whether you can handle work yourself or need to hire contractors, you should be prepared for the time and expense of maintaining your property so that it can keep its value and avoid more costly repairs in the future.
5. Do You Have Any Savings?
While there are loan programs available to some borrowers with a down payment of 3.5% and sometimes less, you’ll need some cash for a deposit, a down payment, closing costs and an emergency fund when you buy a home.
6. What Does Your Credit Profile Look Like?
Request your free credit report. For a small fee you can get your credit score. Lenders typically require a minimum credit score of 620 or 640 and higher for government-insured loan programs, but for the lowest mortgage rates you need a credit score of 740 or above. If you have poor credit, paying rent on time at an HHHunt apartment home community helps build better credit.
7. What Can You Comfortably Afford to Spend on a Home?
You can have a free consultation with a mortgage lender to find out how much you can borrow to buy a home, but you should develop your own budget to determine how much you can spend on your housing payment while still being able to pay your other bills and save for the future.
Your answers to these questions can help you make the right choice and determine if you’re ready to buy now or need to wait a little longer.