It's a big question that is not easy to answer: should you keep renting or is it time to start thinking about buying a property?

One of the main advantages of being a homeowner is building equity with every mortgage payment rather than putting money in your landlord's pocket.

However, that doesn't mean buying is always the best choice – as a tenant, you have more flexibility and avoid many of the costs associated with owning a home.

"It's a very personal decision," says David Parsons, Real Estate Agent / Owner of Re / Max North Professionals in Burlington, VT. "For those who want the flexibility to move quickly, don't feel like maintaining a property, or need to save money before buying, renting is well worth considering."

But there is more to consider. We know how much your rent compares to a buying problem and we are here to help.

Here are seven questions to consider in order to decide what is right for you.

1. Will you even be eligible for a mortgage?

When you don't have enough money in the bank to buy a home with cash, you need a mortgage. Before dreaming too deeply about your new home, check with a lender to see if you are eligible for a loan. They can also tell you how much of a mortgage you qualify for, which is determined in part by your debt-to-income ratio.

"Job stability, credit history, and savings are some of the important factors used when applying for a mortgage," says Tim Ross, CEO of Ross Mortgage Corp. based in Troy, MI.

If you qualify for a mortgage, buying a home can be a good next step. If not, the first thing you should do is to spend some time strengthening your finances.

"Qualifying for financing is a crucial part of buying a property. So if you have challenges in this area, renting can be a good alternative, "says Ross.

You can also use the realtor.com® rental-purchase calculator to see if the cost of owning a home is actually cheaper than renting, given your location and budget.

2. Can you afford the closing costs?

So you've saved enough to pay a deposit – congratulations! But be careful: If you want to buy, there are higher upfront costs.

"Buying a home takes more money than just the down payment," says Michele D. Hammond, a personal account manager for Chase. "The closing costs are used to pay for things like appraisals, inspections and a lot more. These can be up to 3% or more of the final purchase price. "

If you're buying a six-figure home, 3% or more can mean thousands of dollars to prepay on top of your down payment.

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Look: Buyers should understand these factors that drive the price of a home up

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3. Can you afford the neighborhood?

Some costs – such as the down payment, closing costs, apartment viewing and appraisal – are just the price for admission to the home. However, other real estate expenses depend entirely on where you plan to buy.

"When you look at the total cost of owning a home, insurance and property tax prices vary by community and location," says Ross.

You can check with your local tax office or appraiser to see what property taxes apply in your area and calculate what to expect based on the appraised value of a property. Note that property taxes vary widely depending on the state and city.

4. How long do you want to stay?

When buying a home, allow at least two to three years to avoid losing any money, says Ross.

"Remember, there is a cost to buying and selling a home," says Ross.

When you buy, you have closing costs and a down payment. When selling, you need to take into account the property sales commission, which is usually 6% of the sales price. Given that homes are growing 4% to 5% a year, you may have to live there for a few years to cover the cost of a sale.

"If you are certain that you will be staying in place for five to ten years or more, you will find the prospect of meaningful wealth accumulation," says Ross.

If you're unsure whether you can commit to a home for at least 24 months, Ross recommends renting the money saved and setting it aside for a down payment and closing costs. It is better to save that money in the meantime and have it available when you are ready to buy a home.

5. How important is the freedom to renovate?

If you feel like tearing down walls, trying your hand at tiling, or experimenting with a bold new wallpaper, it's better to buy than rent (unless you have a very open-minded landlord). Owning a home gives you the freedom to renovate and decorate to your heart's content.

"For those who value the concept of ownership or are planning to invest equity in a property, ownership may be the better way to go," says Rich gardener, Real Estate Agent / Owner of Re / Max North Professionals in Burlington, VT.

6. Are you ready for maintenance?

A great advantage of being a tenant is that your landlord is likely to be responsible for most of the maintenance and housekeeping that homeowners have to deal with.

"When you move from renting to owning, they are responsible for maintaining the property, which can be more expensive than many think," says Hammond.

From standard maintenance like replacing smoke alarms and shoveling snow to major issues like burst pipes and foundation problems, home ownership has a long to-do list, and maintenance can be costly and time-consuming.

7. Are you satisfied with some market volatility?

The real estate market is hot right now, but it's not guaranteed to stay that way.

"The real estate market is volatile, and while it has been an excellent investment in the United States in the past, house prices sometimes go down," says Parsons.

"If you are uncomfortable with going through the inevitable ups and downs of a market, renting can provide more security," he adds.

source https://seapointrealtors.com/2021/08/12/should-you-buy-a-home-or-keep-renting-how-to-decide-in-7-steps/

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