Your friends, neighbors or relatives are buying homes. And you’re wondering if you should stop renting and buy a house too. Your dog wants a yard, your kids want a playground, and you wouldn’t mind a garage and an office.
There’s only one problem: You aren’t sure you can afford it.
Hold up! Deciding whether to rent or buy always comes down to what you can afford. Are you financially ready to buy a house? Or is renting still the smarter option? Let’s compare renting versus buying and find out which is right for you.
Owning your own home is the Everyone’s Dream. There’s no doubt that having your own address comes with a lot of satisfaction and pride—it also comes with plenty of extra costs and maintenance. That’s why you want to be absolutely certain you’re ready to buy a house.
How do you know you’re ready? If you can answer yes to the following questions, you’re prepared to take the plunge.
We’re talking no student loans and no consumer debt—nothing!
If you got laid off today, could you pay your monthly expenses (like your mortgage and bills) for at least three to six months while looking for work?
Having 20% or more means you don’t pay that pesky PMI (private mortgage insurance), which basically protects your lender from going bankrupt if you stop paying your mortgage.
Making sure your mortgage payment (including principal, interest, property taxes, homeowner’s insurance, PMI and HOA fees) is no more than a fourth of your monthly take-home income leaves plenty of room in your budget to achieve other goals, like saving for retirement and putting money aside for your kids’ college funds.
If you’re not crazy about where you live, why would you buy a house there?
Find expert agents to help you buy your home.
If you answered no to any of the above questions, now may not be the right time for you to buy a house. Put your home purchase on hold and focus on your finances until you can answer yes to all of these questions.
You found the perfect house, and the sellers are practically giving it away. It just might be the deal of the century. Even though Sallie Mae’s still clutching your pocketbook, you’d be dumb to walk away—right?
With real estate, you come out better off when you buy the right thing at the right time—not by taking advantage of the market. Never buy a house based solely on the market. Buy when you’re financially ready.
Even if you’re financially ready to buy a home, you should still be sure your heart is in the purchase. So, before you make your decision, consider the pros and cons of buying a house.
Not quite. Taking control of your money is the grown-up thing to do. If you’re 25 and feel like you’re behind the curve because you haven’t bought a house yet, stop worrying.
There’s no reason to rush into a big purchase just because everyone keeps telling you that’s what you’re supposed to do. Real grown-ups know homeownership isn’t the money-smart choice in every situation.
First off, let’s get something straight. Renting is not a waste of money. Sure, giving your money to the landlord may mean you’re not investing in homeownership. But you’re paying to live somewhere! And as long as you’re paying to live, your money is being well spent.
Though renting as a way of life is not something we recommend, there are a few situations in which renting is the better option.
If you have student loans or credit card debt to stomp out, consider your apartment your stomping ground. Unless your rent is devouring too much of your paycheck—in which case you should probably find a cheaper apartment—renting can offer you the opportunity to get out of debt and save.
If you’re in the military or if you don’t plan to stay long in an area, then you should rent. In most areas, you’ll need to stay in a house for two to three years to make buying worth the investment.
Buying a house is a long-term commitment. As is the case with any relationship, you should think through your decision—acting impulsively is never a smart real estate move. So, if you just got married, graduated from college, or aren’t sure which neighborhood you want to live in, don’t feel guilty about renting until you have a solid plan.
Just as home buyers face upsides and downsides to buying, renters have their own set of pros and cons. Here are the most important ones.
Whether or not you should rent or buy a house may seem like an apples-to-apples comparison if you look at monthly costs alone. In that case, homeownership often tips the money scale because you pay for maintenance, taxes and homeowner’s insurance on top of your mortgage payment. Long-term costs, however, paint a different picture.
If you’re moving every few years or you’re in a super expensive market, renting is probably the cheaper option. But if you’re going to stay put for the long haul, you’ll likely make out better buying—especially when you pay off your home.
Deciding whether or not to buy a house isn’t an easy choice. That’s why it’s smart to partner with a pro who can help you navigate your options.
If you’re looking for a local real estate agent who will offer you trustworthy advice no matter your budget, give our real estate Endorsed Local Providers (ELPs) a try. Our ELPs understand the financial path you’re on and won’t push you to overspend on a house just so they can bring home a bigger commission check.
We only endorse the top agents in your area, since agents are filtered based on your location, so you can trust your ELP to negotiate the best deal on the house that’s right for you. you may call their WhatsApp and or via regular calls.