At some point in your life you will likely need to determine if homeownership is right for you. Here are some questions to ask to help decide if you should rent or buy a home.
- Do you have a down payment? When deciding to rent or buy, the first question to ask is if you have or can save for a down payment. It’s possible to purchase a home with as little as 3.5% down using an FHA loan, but it is best to put down 20%, or you incur the additional cost of mortgage insurance. Thanks to the Protecting Americans from Tax Hikes Act of 2015, private mortgage insurance is now tax deductible if your adjusted gross income (AGI) is less than $109,000. When factoring whether to rent or buy, you’ll also need to have money for closing costs. According to Bankrate, the average closing costs on a $200,000 home in Nevada is $1,850, which includes origination fees charged by the lender as well as third-party charges such as credit report, appraisal and inspections. It’s best to rent until you have the ability to comfortably pay these fees.
- Can you afford upgrades and repairs? When deciding to rent or buy, it’s important to factor in your preference for “being a landlord” versus answering to one. When you rent, you can call the landlord when the plumbing breaks or the roof leaks and voila! repairs are paid for. The downside is you’re at the mercy of the landlord’s timetable and service provider choice. If you want to call the shots on repairs and upgrades, ownership may be best for you. If you buy new, you’ll have a warranty. If you buy re-sale, be sure to ask if there is a transferrable home warranty, otherwise you’ll need to budget for repairs.
- Want flexibility or security? Is your job secure or might you need to take a job elsewhere? Do you have the travel bug or want to settle down? Would having to move because a landlord sold the house you’re renting cause you angst? If your job is stable and you want a place to call home for the foreseeable future, buying is likely the better choice.
- Need long-term equity or tax relief? In many cases, buying a home can help you financially. While there is no guarantee that a home will appreciate, history shows that if you hold onto real estate long enough, it will often yield a return. If you itemize deductions on your tax returns, it is also possible to deduct your mortgage interest. Check with a financial planner to see what’s best for you.
- Do you have a family? If you have children or plan to start a family, deciding whether to rent or buy is dually important. Buying a home in a family friendly community is also a great way to give your children a sense of community. It allows your family to make lasting friendships, and enjoy stability in everything from schools to churches to sports teams.
- How long do you plan to live there? If you’re only planning to stay in a place for six months or a year, it’s a no-brainer to rent. If you’re planning to stay for 20 years, it makes sense to buy. But if your timetable is somewhere in the middle, it can be clear as mud. To help you decide if you should rent or buy, try using an online rent or buy calculator like one from Bankrate, Realtor.com, Trulia or Zillow.
Still not sure if you should rent or buy? Don’t worry. When you come across your dream home in your dream community, you’ll know that you have found home.