Buying vs. Renting (Pros/Cons)
Deciding when and if to purchase a home is a personal choice that demands careful deliberation. Your current financial situation will help determine how to decide. Buying a home involves a significant initial investment including a down payment, earnest money, appraisal and inspection costs, property taxes and insurance, as well as other miscellaneous closing and moving costs. Upfront costs for rental properties are normally significantly lower and include security deposits, first and last month’s rent, non-refundable pet deposits, and moving costs.
Also consider ongoing monthly costs. Either option requires a monthly rent or mortgage payment, utilities, and insurance; however, owning a home also includes property taxes, private mortgage and homeowner’s insurance, and maintenance and repairs.
Aside from costs, there are several other pros/cons to consider when determining whether you should buy or rent.
Buying A Home
Pros
* Investment – value will hopefully only increase or at least remain the same
* Build equity that you can use later
* You can improve upon your home any way you want
* You can decorate it to suit your needs
* No landlord or property management company
* Sense of stability
* You have something to sell later
Cons
* You are responsible for all repair and maintenance costs
* Monthly payments for utilities and mortgage are higher
* May take time to sell later
Renting A Home
Pros
* You are not responsible for repairs and maintenance costs
* Free to move once the lease has expired
* In many cases, utilities and lawn services are paid by the landlord
* Many apartment buildings have security systems
* Usually less expensive than paying a monthly mortgage
Cons
* Privacy issues
* May have to share washer and dryers
* Rent can be increased once lease expires
* Landlord may not fix items on time
* Cannot paint walls or add other features
* Deposit may be required
* May not allow pets
* Neighbors come and go
As you can see, there are many factors that you should consider when thinking about buying your first home.
But if you are ready financially and want to have your own space, you should find a real estate agent and begin your search. The average time that most people take to make an offer on a home once they start looking is two weeks, but take your time. There is nothing wrong with waiting a few months until you are ready.
Rent to Own
Another option you may have is to buy the property you are currently renting, or rent a property that also offers you the option to buy the home at a predetermined price after a certain amount of time. This will give you a chance to see if you like living in the home and will give you time to get your finances in order.
Rent-to-own properties are usually older than other homes and have been rental properties for some time and may not be in great shape. If you are looking for a property that you don’t mind repairing, then this option may be for you.
When looking at a rent-to-own property, you should ask the following questions:
* How old is the home,
* How many times has it been rented out,
* What is the mortgage payment on the home,
* What is the rent per month for the home,
* How much are taxes and insurance,
* Are there any HOA fees,
* How long will I have to make my decision,
* What happens if I change my mind,
* What happens if the home owner changes their mind,
Before you sign a contract, consult a professional that is knowledgeable with rent-to-own contracts. Your real estate agent can help you determine a fair sales price, have the home inspected, and ensure there are no liens against the property.
Make sure the contract provides and exit clause that specifically outlines what will happen if you do not exercise your option to purchase the property when the lease ends.
During the lease period, ensure all mortgage, tax, and insurance payments are being made by the current owner.
New Homes
When you think of your first home, you may be envisioning of a brand-new home. Since the housing market is favoring buyers now, you may get a great deal from a builder that is developing a new housing community, or you may find a plot of land that is in an existing community. This can be a great alternative to buying an older home for many reasons:
* You will have a part in designing the home
* You will have new appliances and lighting fixtures
* You will have new carpeting and flooring
* You will be able to choose all the fixtures, carpeting, and flooring
* You will be able to add a porch or a patio
* You will be able to place the home where you want it on your property
A new home can be very exciting, but it can also be a lot of extra work. The first step in buying a new home is to find property. You should visit builders and real estate agents who will file all the necessary paperwork and permits needed to build on the property. This can take a few weeks, so be sure to plan accordingly.
The next step is to design the home. This is the fun part where you will get to personalize your home to suit your needs.
Once you have been approved for a mortgage, the property passes inspection, and the home is designed, construction will begin. Depending on the time of year, you will have to wait about three months before you can move into your new home.
After construction is complete, you should conduct a final walk-through of the home, check all fixtures and appliances, and have the home inspected before signing the final paperwork.
Buying a newly built home is just one more option you should consider when looking for your first home. Home construction times and costs can vary. Consider all options before deciding on a home that is right for you and your budget.
Using the Housing Market to Your Advantage
By paying attention to current housing trends and keeping a watchful eye on the homes in your area, you will be able to make a competitive offer on a home that will be accepted. Since the market is continually changing, it is a useful tool for those on a budget who want to find a home that is large enough to suit their needs, and will be worth more when it is time to sell it.
When watching the housing market, consider the following:
* The number of homes that are in your area
* The number of days the homes have been on the market
* The price of a new home compared to those that are being sold by homeowners
* The price differences of renting vs. buying
* The number of homes that are in your price range
* The highest price you can pay when buying a home
* Interest rates in comparison to housing prices
* The time of year
Springtime is a good time to buy a home for several reasons:
* More people want to sell
* It is easier to make appointments to view homes
* Prices are usually lower
* People are more willing to reduce their asking price
* Income tax returns can help with a buyer’s budget
While you should consider looking at a home during any time of the year, you will find that many homes will be priced lower in the spring to attract buyers. People who were unsuccessful in selling their homes in the fall or winter months and want to sell before the summertime are more willing to reduce the price of their homes.
This is also the time when interest rates are re-evaluated and many lenders are willing to give loans to those whose credit is not the best. Take advantage when interest rates are at their lowest, even if it means accepting an adjustable rate mortgage. You will have the option of locking into a fixed rate mortgage later.
While the housing market can change, the idea of selling one’s home will not. Homeowners may choose to wait out the current housing market, but if they are eager to buy another home or move to a new location, their wait will be short-lived. Negotiate with homeowners until a fair price can be reached.
This is the same practice during a seller’s market as in a buyer’s market. You may have to play the bidding game for a week or two, but in the end, it is the person who needs to make the transaction happen the most that will end up compromising the most.