Buy Now or Rent Longer? 5 Questions to Answer Before Purchasing Your First Home
Deciding whether to jump into the housing market or rent instead is rarely an easy decision – especially if you’re a first-time homebuyer. But in today’s whirlwind market, you may find it particularly challenging to pinpoint the best time to start exploring homeownership.
A real estate boom during the pandemic pushed home prices to an all-time high. Add higher mortgage rates to the mix, and some would-be buyers are wondering if they should wait to see if prices or rates come down.
But is renting a better alternative? Rents have also soared along with inflation – and are likely to continue climbing due to a persistent housing shortage. And while homebuyers can lock in a set mortgage payment, renters are at the mercy of these rising costs for the foreseeable future.
So, what's the better choice for you? There’s a lot to consider when it comes to buying versus renting. Luckily, you don’t have to do it alone. Reach out to schedule a free consultation and we'll help walk you through your options. You may also find it helpful to ask yourself the following questions:
1. How long do I plan to stay in the home?
You'll get the most financial benefit from a home purchase if you own the property for at least five years. There are costs associated with buying and selling a home, and it may take time for the property’s value to rise enough to offset those expenditures.
The longer you own a property, the more you are likely to benefit from its appreciation. If you plan to sell in less than five years, a home purchase may not be the best choice for you.
2. Is it a better value to buy or rent in my area?
One helpful tool for deciding is a neighborhood’s price-to-rent ratio: just divide the median home price by the median yearly rent price. The higher the price-to-rent ratio is, the more expensive it is to buy compared to rent.
Keep in mind, this equation only provides a snapshot of where the market stands today. We can help you interpret the numbers to determine if buying or renting is the better long-term value in your particular neighborhood.
3. Can I afford to be a homeowner?
To determine your financial readiness, examine how much you have in savings. After committing a down payment and closing costs, make sure you will still have enough left over for ancillary expenses and emergencies. Then consider how your monthly budget will be impacted.
4. Can I qualify for a mortgage?
Every lender will have its own criteria. But, in general, you can expect a creditor to scrutinize your job stability, credit score, savings, and debt obligations to make sure you can handle a monthly mortgage payment.
It’s always a good idea to get preapproved for a mortgage before you start house hunting. Let me know if you’re interested, and I’ll give you a referral to a loan officer or mortgage broker who can help.
5. How would owning a home change my life?
It’s important to consider how homeownership would affect your life, aside from the long-term financial gains. In general, you should be prepared to invest more time and energy in owning a home than you do renting.
However, you might relish the chance to tinker in your own garden or make HGTV-inspired improvements. The great thing about owning a home is that you can generally do what you want with it – even if that means painting your walls fiesta red one month and eggplant purple the next. The choice – like the home – is all yours.
HAVE MORE QUESTIONS? I’VE GOT ANSWERS
The decision to buy or rent is among the most consequential you will make in your lifetime. I can make the process easier by helping you compare your options using real-time local market data. So don't hesitate to reach out for a personalized consultation, regardless of where you are in your deliberations. I'd be happy to answer your questions and identify actionable steps you can take now to reach your long-term goals