Mistakes People Make When Deciding Whether to Rent or Buy A Home
Should I rent or buy a house? Sooner or later, every renter asks this question. Do they keep paying monthly rent, or secure a mortgage and buy a place. Many consumers are taking the home-ownership plunge this year. According to the National Association of Realtors, 35 percent of this year's home buyers are first time buyers.
Some people should absolutely buy a home. Others should rent for a little bit longer. Deciding whether to rent or buy a home is difficult, and there are costly mistakes consumers make along the way, such as:
Not Having a Sizable Down Payment
When asking yourself "should I rent or buy", think about a down payment. It's smart planning to put as much down on a home as possible. This lowers your payments and may get you out of paying expensive mortgage insurance (PMI). Plus, many mortgage options require a good chunk of the home's cost down. If you don't have at least 5 percent saved as a down payment, and this doesn't include your emergency fund, tighten up your spending and sock some more money away while continuing to rent.
Ignoring Credit Score
Not checking your credit scores when deciding whether to rent or buy a home sets you up for misery. Poor credit can derail your chances of getting a mortgage at all, or getting one that has higher interest. Check your credit and make sure everything on your report is accurate. If you have late payments, get and stay current. If your credit needs a bit of work, rent a few more months until you improve it.
Failing to Consider Current Employment
Potential home buyers should feel confident they can keep their job at their present rate of pay. If there's whispering of layoffs, it's smart to continue to rent. In addition, consumers sometimes purchase a home without considering the possibility of moving to another city with their jobs, and end up frantically trying to unload their house a few months down the road. Think about your employment security and the likelihood of you living in the area for at least a few years for it to be worth it to buy.
Buying For The Wrong Reasons
Many buyers jump into home ownership because their friends buy a house or because of pressure from their parents. These aren't good reasons. Deciding whether to rent or buy an Eagle Ridge home means getting real with yourself. Are you mature enough to make a mortgage payment every month? Can you handle the insurance, taxes, repairs, and other responsibilities a home demands? Will you be able to give up that life dream of biking across the country or teaching English in Africa?
Believing Renting And Buying Cost The Same
"My mortgage payment will be the same as the rent I'm paying now, so I'll be fine," is a common mentality but one that can cause prospective home buyers to struggle with mortgage payments in the future. In addition to the payment, home owners are on the hook for taxes, insurance, and repairs. These add up! According to The Balance, would-be buyers should adhere to the 1 percent rule, which is that annual home maintenance will cost 1 percent of the home price. So, if the home is $200,000, expect to pay $2000 every year in repairs.
Failing to Hire a Real Estate Agent
Real estate professionals make a big difference in the sale of a home. A good real estate professional can help a homeowner negotiate a fair price for their home. Many homeowners are not as comfortable negotiating with others, and may not get as much for their house as an experienced real estate agent.
Even just setting the price to sell a home can be very difficult for many homeowners. Often homeowners are inclined to base the price of their home on their own sentimental feelings, or on homes in the neighborhood that are not as comparable as they appear. The best way to ensure that a home is properly priced is to work with a real estate professional who knows how to price the home based on comparable properties in the neighborhood.
It pays to be cautious when deciding whether to rent or buy a home. While home ownership is often a good investment, it's not always for everyone. Think it through, examine your finances, and make sure you're ready.