Owning property is often considered one of the great landmarks of success and maturity. This mindset makes sense- it is no small feat to purchase a home! Though it should most certainly be something to strive for, buying a home before you are mentally and financially ready can be disastrous. You don’t want to purchase outside of your means, nor settle for a home you aren’t passionate about simply because you want one. There are many questions you should ask yourself before you begin the home-buying process, and an understanding of the current housing market in your area is vital. If you are reckoning with the pros and cons of buying vs renting, consider these factors before making the leap.
LOCATION, LOCATION, LOCATION
Are you comfortable in your current location? Is this spot somewhere you can see yourself in 5 years? 10 years? Reflecting on your location is key to deciding whether you should buy or rent in your current area. If you are unsure whether you want to stay put or take up space in another locale within the next 5 years or less, buying may not be right for you at this stage. Often we hear that renting is about pouring money into something that doesn’t belong to us, but in turn for the rent, you can live in an amazing space for a limited amount of time. In contrast, if you feel as though you want to stay where you are for the long run, it may be best to start the buying process so that you can invest in a property that belongs to you for years to come.
PURCHASING POWER IS KEY
Before you can make a sound decision on whether or not purchasing a house works for your lifestyle, you need to gauge your overall purchasing power. You can find calculators online that will give you a sense of how much you can afford. There are various factors that play into your purchasing power including credit score, savings amount, down payment, debt to income ratio, and payment history. Major debts such as past mortgages, credit cards, and car loans need to be factored into this decision. When determining your pre-approval amount, a loan processor will look at these factors to decide whether or not you are financially sound enough to purchase a home and how much you will be able to borrow. If you don’t meet all of the criteria or are on the lower end of the spectrum when it comes to purchasing power versus your wish list, renting may be the best option until you are able to bring all aspects to pristine health. During your rental period, focusing on cleaning up your credit and saving money diligently for your down payment are key aspects of growing your purchasing power.
THE FUTURE IS NOW
If you’ve decided that the home purchase route is the right one for you, consider what the future may hold. Reflect on questions such as:
- Will I be married or have roommates now or in the future?
- Do I plan to grow my family?
- Do I want pets?
- Do I plan to host holiday gatherings, events, or guests at my home often?
- Do I want to build on or renovate a home or do I prefer a move-in-ready type?
- What floor plan layout works best for my plans now and in the future?
Although you plan to purchase now, or in the near future, you must contemplate the wants and needs that may arise in the future. This way, your home will fit your changing lifestyle as you and your family grow and change. If you are uncertain of your future plans, renting would be the best option as you can oftentimes choose between a long-term or short-term lease agreement. Similarly, you may decide the timing is right for you but the market is not. Be sure to have a concrete understanding of the housing market before you make an investment that may not be as successful as you had planned.
When deciding whether renting or buying a home is the right option for you, there are many different factors to reflect upon before jumping in headfirst. Consider factors such as your financial buying power, your debt-to-income ratio, your savings and purchase plan, and your future personal goals. Understanding the full picture will allow you to make the best choice for you now. Still not sure what the best option is for you? Contact me today, I would love to help walk you through the process to determine the best route for you.