Whether someone is a first – time home buyer, or someone who recently sold a house, and looking for another, real estate professionals, are often asked, whether the individual, should buy, or rent a place to live. Rather than providing a simplistic, basic, one – size – fits – all, answer or response, let’s review some of the considerations, factors, etc, will might affect one’s approach. In an attempt to remove the emotional factors (which is almost impossible, when it comes to the home – finding process), this article will review 6 factors, which might be relevant to one’s very personal decision.
1. Down – payment: Before considering anything else, one must consider finances, etc. The first consideration, therefore, must be, does the person have the down – payment? Understand, that while the percentage required to put down, to get a mortgage, in most cases, this is 20%. When one obtains a mortgage requiring a lower down – payment, it may bring with it a slightly higher interest rate, different qualifying terms, and most certainly, a larger monthly carrying charge/ expense.
2. Credit – worthiness; existing credit used; credit needs: Many factors go into what a lending institution might consider credit – worthiness. Of course, one’s credit score (also known as FICO, etc) is often a qualifying, or disqualifying factor. Unless that score is around 700, or higher, one will usually be unable to get the best rates available, if able to qualify for a mortgage, at all. Another factor, is the amount of total credit already approved for, and how much of that is used. Most banks have a maximum percentage for credit used, as a percentage of income, as well as a maximum figure, for the total credit, including other debt and the new mortgage. This figure is often somewhere around 36%. Obviously, the higher the down – payment, the lower the amount of mortgage needed!
3. What are your needs?: Before looking, determine your real needs. This should consider factors, such as affordability, and comfort level, location, size of house, and other relevant factors.
4. Your plans?: Are you planning on buying a starter home, or a keeper? How long do you expect to live here? Are you from the general area, and if not, are you sure, you’ll like this area? Many people from outside an area, considering relocating, often rent for a year, to be certain, it’s the right fit, for them. Also, the financial considerations/ expectations, depending on how long you plan to remain in this new location, are major determining factors, in terms of buying or renting.
5. Personal/ family circumstances: Are you planning, in the foreseeable future, to undergo some sort of major change in your family situation, such as marriage, divorce, children, etc? These are all factors which should go into your house – hunting considerations.
6. Market conditions: Sometimes, there is a buyer’s market, and sometimes, a seller’s. At other times, it’s somewhat neutral. Remember, most people, especially those seeking a somewhat permanent stay (10 years or more), should find a house, which will fit their needs. There are also advantageous times to buy, such as currently, with the low mortgage interest rates. Understand that as little as a 1% difference in interest rates, may make hundreds of thousands of dollars, of difference, over the life of the loan. It also makes a huge difference, in terms of the price home, one might be able to afford!
Whether you buy or rent, is a personal decision, each one must make for himself. A very short stay, anticipated major changes in one’s lifestyle, finances, or inability to find the right place, often suggests renting, at least for a short – term, such as a year. Don’t let anyone pressure you to make a decision you aren’t comfortable with!