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Renting vs. Owning

To own your home is part of the American dream.  But learning more about the differences and benefits between renting and owning will help you determine which route to take.  Here are a couple factors to help you consider and evaluate whether to become a homeowner or a renter:

Are You Financially Ready?

Buying a house requires a down payment and paying a monthly mortgage, which usually lasts anywhere from 5 to 30 years.  Depending on the type of home loan that you’re offered with.  (Ex: conventional loans, FHA loans, VA loans, fixed-rate loans, and adjustable-rate mortgages.)  FHA loans (first time home buyers) require a 3.5 to 10% down payment while conventional loans require a 20% down payment.

You’ll need a decent credit score if you want to qualify for a loan.  Do you have a good job history?  Are your debts paid in full?  Do you have a steady income to make monthly mortgage payments?  Mortgage companies (lenders) will determine your debt-to-income ratio, which generally can’t top 43% to qualify for a home loan.  You will need to get pre-approved (letter) from your lender first before searching for the right home.  

If you need some time to work on your credit or finances, you may want to stick with renting for a while. 

Length of Ownership

Committing for 3-5 years (and beyond) is the minimum amount of time you should stay at your home.  You can make money by owning your home from appreciation in value.  Over a period of time, house values usually increase which is a huge benefit.  

If you’re considering moving out of town or unsure about job security in the short-term, then renting would be the best option.  You can rent places on a monthly basis if you want to avoid long-term commitment.  

Property Taxes

Property taxes is something that cannot be avoided as a homeowner, but tax rates differ in each county and city.  The state of New York ranks #43 with the highest property tax rate in America.   Make sure to evaluate property tax amounts in the area you’re looking at when doing research.  A lot of websites such as realtor.com or Zillow.com have built in monthly costs which includes property taxes so you can get an accurate estimate on how much you will need to pay.  There are some tax breaks that you could qualify for as a homeowner.  Depending on the tax break, you could write off the interest that you pay on your loan, closing costs, and other types of expenses.  

You’ll have fewer expenses when renting since the monthly fee usually includes the property usage and some utility bills.  

Maintenance Skills

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Every house will require regular maintenance and repair.  You can minimize the repairs and maintenance you would have when owning a newer house, but you’ll never eliminate all maintenance problems.  You’ll need some basic handyperson skills so you won’t go broke hiring a repair professional to remedy every issue.  Here are some examples every homeowner should learn how to do:

  • Clean gutters of leaves and debris
  • Put in new batteries in smoke detectors
  • Change a furnace filter
  • Shut off the main water valve and outdoor faucets
  • Being able to flip breaker switches
  • Sealing counters and deck
  • Locate studs on wall to hang shelves
  • Patching up holes and painting a room
  • Pulling weeds and cutting grass
  • Shoveling snow

Having an emergency fund to pay for unexpected repairs that is beyond your expertise is also a great idea to have.

If you’re renting your place, someone else (ex: landlord) is responsible for fixing anything that breaks.  When your refrigerator stops working or furnace quits running, call your landlord.  Your landlord will arrange for the repair and pay the bill.  

Which Method is Best?

As you can determine, both options of renting and owning have some really great benefits.  No two situations are the same.  Deciding for yourself requires consideration in different options and the best choice for yourself.  What is the best method for you might not be right for everyone else.  If you decide that owning a home is the right choice for you, contact me.  I specialize in helping people become homeowners, and I can help you with this process!