To Rent or to Buy a Home?

Whether it is best to rent or to buy a home is a very important consideration – and one that nearly everyone must make a decision about at some point in their lives! Housing is a necessity, so deciding what type of housing is best for you and your family (and for you and your family’s finances) is of great importance.

As is the case with any major decision, there are many things to think about before deciding whether renting or buying a home is best, and there even are some “in between” options that you will want to consider. Read on for our checklist of questions to answer before you decide on your best housing option.

1. You may very well have enough money to buy a home, but do you have enough money to keep a home? Remember that everyone who has been forced to foreclose on a house once was able to obtain a mortgage too.

2. How much more can you afford to spend on housing each month than you are spending on rent right now? Even if your monthly payments on your mortgage are similar to your monthly rent, the costs will be above and beyond this. You will have to pay property tax, homeowners insurance, and potentially private mortgage insurance (PMI), as well.

3. Is your primary reason for wanting to purchase a home the investment opportunities? In general, homes appreciate at a rate of about 4% per year, and investments in the stock market tend to be much more lucrative than purchasing a home. Most experts warn that the investment in and of itself is not a good reason to buy a home.

4. If you choose to buy a home, will you be paying enough to qualify for deducting part of your mortgage interest and real estate taxes from your tax return? In order to be eligible, your payments must exceed the standard deduction in one year. Fortunately, most borrowers qualify for this.


5. If you are considering purchasing a home, how long would you plan to be in it? If you decide to sell after just a couple of years, you probably will end up losing money on your “investment”.

6. Are you prepared to pay for repairs and problems with your home, or financially would it be better for you to have a landlord to rely on?

7. Do you want to be responsible for the upkeep and renovation of your property, or would you prefer to leave this job to a landlord?

8. Are you concerned that rental amounts might rise unexpectedly in the future? As long as one’s mortgage is not an adjustable rate mortgage (ARM), homeowners’ monthly housing costs do not increase.

9. Is there a reasonable chance that your income will be changing in the near future? If so, such as if you think you may loose overtime pay, then you might want to delay purchasing a home until the situation is reconciled.

10. How much will purchasing a home cost other than monthly payments and the down payment? There probably are expenses that you have not planned for yet, such as closing costs.

11. Is it important for your financial and personal goals to build up equity?

12. Are you tempted to buy a home just because interest rates are low? Remember, if you cannot afford all of the costs of being a homeowner, than the interest rate is irrelevant.

13. Have you explored all of the options “in-between” buying and renting? You might find that your best housing fit actually is a condo, leasing with the option to buy, or agreeing to a seller financing mortgage option.

14. How much money do you have to use for a down payment? If you are unable to save at least 10% of a home’s purchase price for the down payment, then you might not be ready for the financial obligations that follow. Even though there are “zero down” mortgages, these very rarely are the best option. Remember also that if you make a low down payment, you will more than make up for it in high monthly payments.