The decision to rent or buy depends on your financial situation, your lifestyle, how long you expect to remain in a certain area, the prevailing mortgage rates and rents in your area, and many other factors.
If you’re a renter, it can be frustrating to write a rent check every month and have no home equity to show for it at the end of the year. But if you aren’t certain that you’re going to stay put for a few years, it’s probably not the right time to buy—equity or no equity. You should not buy property and automatically assume that you’ll be able to rent it out or sell it when you move.
Ask your NeighborWorks homeownership planner for his/her assessment. There are also a myriad of tools available online to calculate the financial benefit of renting or buying, depending on your situation.
Owning a home takes time and hard work and it is perhaps the greatest financial investment you may ever make. It’s essential that you protect your new asset through home safety precautions, sound household budgeting, and regular home maintenance. As you pay down your mortgage over time, you have the satisfaction of knowing that you are building equity for the future. You also will gain pride in ownership, personal stability, potential tax benefits and be a part of building a stronger community.
The amount of money you can afford to pay for a home depends on many factors, including your income, your debt, your monthly expenses, the amount of money you can contribute to the purchase up front, among other factors. The maximum dollar amount that a bank will agree to lend you should be the upper limit; in most cases, it is advisable to borrow less than this amount.
There are many calculators available online to help you get a general sense of what you can afford on sites like Zillow, Bankrate.com, and others. These sites take a look at your TOTAL debt when calculating what your maximum home purchase price. When looking at your total debt (your house payment plus any other monthly debts you might be paying), most lenders consider your total monthly debt to be sustainable when it is 36% or less than your gross monthly pay.
There are many factors to consider when deciding between renting and buying, at NeighborWorks we recommend meeting with our homeownership planners as your first step. Our free appointments will allow you to look at your credit, budgeting habits, affordability factors, financial assistance you may qualify for and ultimately how to make your homeownership goals a reality. Create a homeownership profile to get started!