To buy or to rent a house— have you ever asked this question? The dream of homeownership can sometimes seem so far away that we don’t even consider the possibility.
As we’ve highlighted before, property ownership goes hand-in-hand with wealth building in the US and plays a key role in the development of the LatinX community. For this reason, it is important to evaluate the pros and cons of both renting and buying so that you can make an informed decision when the time is right for you.
What are the criteria that will be important to consider? Are you ready? Can you afford all of the upfront costs plus the mortgage installments? Do you want to take root where you are? These questions must be answered even before you start to browse listings.
A good strategy is to weigh the pros and cons of either option.
There are so many theories, techniques, calculations, finance books, youtube channels, and opinions that abound, each with a definitive formula on what is best to do with your money. What is best for one person, however, may not necessarily be the case for another.
Of course, renting is an easy, fast and practical option. You can find a property, close a contract and move in a few days— all the more easier if it’s furnished.
Buying is a much more complex decision. It depends on many factors, both financial and personal, as well as your desire to stay in a single place for a long time.
If you’re still evaluating your options, ask yourself the following questions:
For a few years now, this is a maxim that has become increasingly popular, but like all advice on the internet: it depends. The main argument is that paying rent is a waste of money because you are effectively paying your landlord’s mortgage and not your own.
While this may be true on some points, the argument ignores some very important details. Although the rent is often close to a mortgage payment, buying a home involves upfront costs that you may not be able to afford.
Keep in mind that in addition to the mortgage, insurance, and brokerage costs, you may still need to pay for the move, buy furniture, appliances, and pay for immediate updates or renovations to the property. It is good to consider ALL costs before making any decisions.
Rent guarantees a home and may be the best strategy for living comfortably while saving the money needed for the upfront costs of a purchase a few years from now.
If you believe that buying is the best solution for you and feel ready for a new home, we can help you confirm. Check out these signs that you might be ready to buy a house:
1. You always pay your rent on time. If your rent is comfortably adequate for your monthly income, you may be ready to pay your mortgage payments. The question is: how much do you have for a downpayment?
2. You have a credit score of at least 580 or more.
3. Your accounts are all up to date and your income is stable. You need to prove financial stability to qualify for a mortgage, and you have to be prepared for closing costs, taxes and utilities, as well as home or appliance repairs. It is recommended to have between 3 and 6 months of expenses saved to avoid financial distress in an unforeseen event, such as losing your job.
4. Are you ready to put down roots? Evaluate the country, city and neighborhood you want to live in for years to come.
5. You are concerned about rent increases. Your rent is conditioned by the market and your landlord’s wishes. The value of the installment of a loan can be defined and fixed, which can give you more peace of mind and stability.
6. You’re prepared to cut spending and change habits. Buying a home is a tough commitment to keep, which means you may need to cut spending to secure your payments. In addition, a new home can increase your maintenance and cleaning costs and increase your time and attention.
7. You want to start building equity. With every mortgage payment, you increase your equity a little bit.
8. You are willing to research and study about mortgages. Knowing your options, your rights and duties regarding the mortgage can make all the difference when buying your home. Don’t leave this important step to others.
To buy or to rent? With property ownership going hand-in-hand with wealth building, it is important to evaluate the pros and cons of both so you can make an informed decision.
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