To rent or not to rent? That has been the biggest question and fear of first time home owner. With the last tax credit, we have seen more first time home owner stepping up to the plate and purchase a home. The biggest question is, was it a wise decision? Did they find a great deal? Did they make the right decision. Those questions will have different answers to each and every one of us depending on your life and financial situation.
Most of the time, we see advertisement that say “why rent?” or “why make your landlord richer?” or “stop flushing your rent money down the toilet”. Think again. Why are you renting in the first place? Here are some of the reasons:
1. New to the area. You might be in a relocation state to a new are. Since you are new, you might want to take time to get to know the area to see if the area fit your lifestyle. It is wise to rent for a few months so you can scout the area and the city to see if you really want to live there.
2. Saving up. The huge debate about renting is does it really save you money? If you put your investment hat on, you will get a different answer than when you put your life hat on. Since you are renting, you only pay rent and whatever utility bills that you are responsible for. Simple as that. If the water heater doesn’t work or the garage door opener won’t work, just just call the office and schedule to have them come out to fix it. If you buy a house, guess who you are going to call? The answer is obvious! Not only there is cost of fixing broken items but if you buy a house, you will probably buy a house that is a lot bigger than the apartment that you are renting. Well, you just added more to your bills (watering your yard, buying lawn mower, trimmer, more rooms to furnish and more).
3. In transition state. If you are having to relocate or you don’t know where your job is going to put you in the next 2 or 3 years, the best option is to rent. Why? If you are not 100% sure that you want to live in the area and start a family and may not move in the next say 5 to 10 years, then you should rent. If you own a house at this stage where you don’t know or not sure of your life plan and it changes, say you need to move to another city, state or country, it will going to cost you. Cost in the sense of selling cost. Selling cost not only mean the bottom line number, but the hassle, the headache and the inconvenience.
4. Can’t figure out your finances. This is a tough one! Most people live day by day and don’t think of what is ahead of them. Life happens and when it does it will throw a monkey wrench and all is out of whack! When you are visiting this topic or rent or buy, ask yourself these questions: Do you have any money set aside for emergency? This is for real emergency not I need an iPhone or new pair of shoe emergency. Do you have a budget on your monthly expenses? If not, you might want to create one. This will help you to see your income and your current expense and know how much mortgage you can afford. Forget about your loan qualification. If some financial institution qualifies you for a million dollar, would you buy a house in that amount? I hope not! Rule of thumb on mortgage expenses are not to exceed 35% of your TAKE HOME INCOME.
These are just some things to think about when someone tells you that you should buy a house NOW! Some might say it is a good time to buy, you can find a great deal, there are lots of foreclosure that you can buy at a steal. Hold your horses! A home will be your biggest purchase, you don’t want someone who don’t know you well like you do, to tell you what you should do. You know yourself or if you have a spouse, both of you should sit down and think it through.