There are many reasons why you may have thought about purchasing a home. Maybe you have a growing family that needs more space or you’re tired of paying rent and want to invest your money. Maybe you’d like to get the tax breaks that homeowner’s enjoy. Those are just a few reasons that I hear from first time home buyers.
You’ll often hear people encouraging you to purchase a home and they’ll do so by saying something like “you can buy a $xxx,xxx house for what you’re paying in rent. You’re just throwing your money away!”
Although that does have a bit of truth to it, that’s a dangerous way to approach the decision to buy or not.
Don’t simply compare what you’re paying in rent to what you’d be paying with a low interest mortgage payment. Even though it can be an asset for the future, you may not be ready financially to make the commitment.
It’s highly recommended that you have a down payment of at least 10 to 20 percent and have an emergency fund socked away that can get you through 3 to 6 months of bill payments.
Sure, there are loan programs out there where you can buy a home for 3.5% or even no money down.
Why should you make a larger down payment? PMI also known as Private Mortgage Insurance.
It’s an extra cost that you pay each month to offset the risk to whatever bank is lending you the money to buy your home. If you put less money down, you are considered more “risky” and therefore you may a higher monthly payment.
For most loan programs, you’re paying PMI if you put less than 20% down as a down payment.
This is definitely something you should talk to your Loan Officer about when getting pre-approved to purchase a home.
There are also other points to consider when deciding whether to rent or buy. Buying a home is touted as ‘smart’ and renting as ‘dumb’ but that’s not always the case. Purchasing a home can be a good decision, but some experts believe that it’s a bad financial decision and that the idea of home ownership is overrated.
Some things to consider when deciding whether to rent or buy include the fact that when you pay off your mortgage the home belongs to you. If your home has appreciated more than the taxes, mortgage and interest you’ve paid in – you’ve earned a return or simply break even.
Keep in mind that owning a home also qualifies you for tax credits that can offset some of the costs. But, even though you may own your house outright, you’ll still pay a significant amount of taxes and interest.
You should also realize that renting isn’t exactly “throwing your money away.” You get a place to live and you don’t have to pay for issues such as repairs and maintenance. So, rather than make a decision on what the headlines are saying about home ownership being the best route, you should consider your current situation.
Figure it out by researching the pros and cons of home ownership, crunching numbers and taking a long, hard look at your finances and lifestyle. You may be moving from place to place in your career and don’t need the hassle of putting your house on the market every year or so.
Consider the cost of housing in your area. Houses may be too expensive for your pocketbook right now, so it could be better to rent. But, renting may also be expensive and owning a home might be the better option.
Your situation isn’t like others and you need to think about where you want to live, what type of house and environment you’re looking for and how it will all pan out in the future.
In the end, know that sometimes it’s best to rent rather than buy – it all boils down to what fits right to you.
If you’d like a professional to guide you through the process without pressuring you to buy, please call me at 765.438.7952
It is 100% free to work with me.
I’ll give you advice as I would any friend or family member and that advice will be based on what’s best for you!
I hope this helps get your wheels turning about different things to think about when deciding whether or not buying is right for you!
If you know you’re ready to buy and you’d like me to send you a list of homes that fit your situation, take my “Dream Home” survey right here so I can customize a list of homes that would be perfect for you!
Feel free to comment down below with any questions. I’ll personally reply to each one!
