by Amber Carlton, FMR President-Elect | 30 Jun, 2022
Purchasing a home is a big decision - and one you shouldn't rush into before you're ready. Before you make a decision one way or another, there are a couple of things to think about.
Consider the Cost
When deciding between renting and buying, it's important to take an honest look at your financial situation. Buying comes with upfront costs like a down payment, saving for unexpected repairs, inspection fees, moving costs, and more. It's totally normal to take up to 1-2 years to save for.
One thing people usually think they have to have is 20% down. That isn't the case anymore. You can purchase a home with a conventional loan with 3%, 5%, or 10% down. FHA is 3.5% down, VA & USDA are 0% down.
Once you close on your home, you will usually have 45 days before your first mortgage is due. This is very helpful in replenishing some of the upfront expenses of buying a home.
How Long Do You Plan To Live In The Same Place?
Selling a house means it's much harder to pick up and move whenever you want. Sure leases can lock you into an apartment for periods of time. You can buy a home and sell it within a few years, but it could cost you more in the long run.
A good rule of thumb: If you're going to stay in a home for at least two years (in our local market), buying a home could make sense.
What Are Your Motivations
Are you trying to invest equity? Has your family grown recently? Looking for a change in your living situation? Any of these are totally valid reasons to buy a home.
The National Association of Realtors chief economist Lawrence Yun referenced the Federal Reserve Survey of Household Finance 2021. The national median wealth of a renter was $8,000. For homeowners, it was $320,000. Your home will not only be your largest investment, it will also be your biggest savings account and an excellent way for you to build your wealth.
We have also seen an increase in rent costs in our area due to low vacancy rates. As our community grows, we are struggling with a housing shortage of homes and apartments. Until supply catches up to demand, both will continue to increase.
Pros and Cons of Owning vs Renting Pros
Pros of Owning a House:
More privacy and extra space.
More freedom to do what you want to your living space.
Homes increase in value over time.
Stable housing costs year-to-year.
Cons of Owning a House:
Maintenance & repair costs.
The time it takes to take care of your home, mowing your lawn, shoveling snow, etc.
High-up front costs.
Owning a Home Saves You Money Over Time
In a real sense, a fixed-rate mortgage means you will actually save money over time. The dollar amount of the monthly payment holds steady, but inflation tends to increase as the years go by. That can add up over the course of a 30-year mortgage. A vast majority of home buyers will receive a fixed-rate mortgage where the monthly payment will remain the same.
Why You Want to Buy
Homeownership is a fantastic investment - but for many people, it's about more than the investment. Homeownership gives you more space, privacy, pride in ownership, and a place to call home for the long term. There's a reason they call it the "American dream."
If you're ready to say goodbye to rising rents, get connected with a REALTOR®.
Amber Carlton, FMR President-Elect