By: Mutual of Omaha Mortgage
Rent Vs. Buy FAQs
Whether you are a Millennial starting out in the housing market for the first time or a long-time renter interested in becoming a homeowner, you may have questions about renting compared to buying a home. Here are some frequently asked questions about the benefits of owning a home versus renting.
Should I Rent Or Buy a House?
Deciding to rent or buy a house is a big decision, but owning a home can come with many benefits. If you have little debt, funds for a down payment, a stable income and employment, and you are committed to living in one place for an extended period of time, you may be ready to buy a home. According to the U.S census, over 65% of people in the U.S. are homeowners. Buying a house can provide long and short term benefits that renting simply cannot offer.
What Are The Pros And Cons Of Renting A House?
Renting a home seems to be a simpler and speedier process compared to buying a home, but it offers fewer benefits. There are three main advantages to renting a home versus buying: increased mobility, lower maintenance costs and less out of pocket expenses upfront. In comparison, there are many more advantages to being a homeowner. Owning a home represents a long term investment that can help a homeowner build wealth and have a nest egg for security.
How Do I Decide Whether To Buy A House?
Prospective homebuyers should consider several factors before buying a home. Buying a home is not only a financial decision, but a choice that should reflect your preferred lifestyle. When deciding whether you should buy a home, review these questions:
- How much unsecured debt do I have?
- Do I comfortably pay my current monthly expenses?
- Do I have a steady income?
- Do I feel secure in my current job?
- Do I want to live in one place for a long period of time?
- Have I established a good credit score?
- Have I accumulated some money in savings?
If your answer to most of these questions is yes, you may be ready to buy a home. Reviewing your income, assets, credit profile and financial goals with an experienced lender will help you determine if you are ready to become a homeowner. A licensed loan originator can also discuss programs with you, which, depending on your personal needs, could make becoming a homeowner more affordable.
Is Renting A Home Cheaper Than Buying?
It is not always cheaper to rent than to buy a home. Renting may seem cheaper than buying a home, but the overall long term costs might surprise you. According to Realtor.com, 66% of the U.S. counties reviewed experienced rent increases in 2019. In fact, Realtor.com also reported that the median cost to buy a home in the U.S. is only one-fourth more than the median cost to rent. Unless you live in a rent controlled or rent stabilized apartment, your landlord can legally raise your rent at the end of your lease. In most U.S. cities, there are no rent control ordinances and landlords typically raise rent a minimum of 3% each year to keep up with market costs and conditions. Owning a home can provide more long term financial and social benefits than renting a home.
Is Buying A Home A Good Investment?
Buying a home can provide the opportunity to build equity and to establish financial security and stability. Homeowners may also be eligible for tax incentives based on their mortgage interest or property taxes. Depending on the type of property purchased, a new homeowner may even have the opportunity to rent out apartments within their home for rental income. As a homeowner makes mortgage payments, they build equity in their home. Additionally, depending on market conditions and home improvements, a homeowner may add significant value to their property over time, making the purchase of a home a sound financial decision.
What Do First Time Homebuyer Need To Know Before Buying?
Before buying a home, first time homebuyers should meet with an expert to better determine their financial goals. First time homebuyers should find out exactly how much home they can comfortably afford before falling in love with a dream home. A mortgage calculator can be a helpful tool to help gain a better understanding of how much home you can afford. Another way to better shop for homes by affordability, is to first contact an experienced mortgage lender for a pre-approval. First time homebuyers should also consider the impact their credit score will have on their mortgage review process. A borrower’s credit score is one of the most impactful data points considered when a lender is determining the credit worthiness of a homebuyer. A strong credit score could be the difference between a borrower’s eligibility for competitive interest rates and mortgage loan programs. Most importantly, when comparing renting to owning, first time homebuyers should include homeowners’ insurance and home repairs in their monthly cost projections to minimize surprises later.