The decision to buy or rent a home. It's a question that requires considerable thought. The truth is, there are many different factors when it comes to weighing the benefits of buying a home versus renting.
When it comes to making the decision to buy or rent, it's important to assess how a home purchase fits into your long-term plans and ask yourself a few key questions. For example, do you enjoy the area that you currently live in so much that you don't foresee a move for at least five years? Are you planning on expanding your family in the near future?
These are just two questions to think about when assessing how a new home purchase might fit into your plans in five or 10 years from now, and not just how it meets your needs today. Here are a few more you may want to consider:
How long do you expect to live in your home?If you plan on putting down long term roots, then from a financial standpoint you may be better off buying. The expenses associated with buying a home can be substantial by the time you add up things such as the down payment, escrow, and other closing costs. For this reason, you may not want to invest in a home that you'll only live in for a short period of time.
Are you considering a career change soon?Moving up another rung on the career ladder can mean needing to relocate to another city, state, or even country. If you think a promotion is in your not so distant future, the last thing you may want to do is lock yourself into a mortgage. Of course, it's certainly not impossible to do and people do it all the time, however, the expenses associated with buying a house and then selling it a few years later to relocate can be costly - not to mention stressful. If you're considering a career change soon, you might want to hold off on buying.
Have you considered the total monthly costs?Deciding if you can financially afford a home should include more than just the mortgage payment. You need to consider all the monthly costs that come with homeownership such as insurance, property taxes, utilities, etc. Doing a little homework ahead of time and being realistic about the money going out every month can mean the difference between enjoying your home or struggling to make ends meet.
Do you have savings to pay for repairs?Homes, even new homes, can require repairs. Pipes can burst, roofs can leak, and water heaters can break. As a homeowner, you'll need to have the funds to make repairs that often can't wait until your next payday.
Making a calculated decision
If you just want to crunch the numbers to evaluate to find out how much house you can afford, there are a number of online calculators that you can try such as MSN.com, and Realtor.com. However, while these tools can give you some basic figures based on price, interest rate, and length of your mortgage term, they don't take into consideration many of the personal factors that could affect your decision. A good rule of thumb would be to look at all the factors before making a decision.
If you'd like to read more about how to estimate closing costs and saving for your first home, visit the Protective Learning Center.