There are more renters today than at any point in the last 50 years. That might seem strange given how the politicians want to tell you how great the economy is, but there are a number of factors that make renting a necessity for many people.
- Home prices are higher than they have been in years.
- Many people took a hit in housing crash of 2008.
- Homes are expensive to own versus a rental unit where you can simply call the landlord.
The problem that this has created is that rental rates are rising everywhere. The demand for rental units keeps driving the prices up and vacancies down.
Should you buy a house instead of rent?
Deciding whether to buy or rent is a very personal decision, but there are some guidelines that you can use to make your decision:
- How's your credit? If your credit rating is low, take this time to fix it. There are services that can help you improve your credit, but the fundamentals are easy. Pay off your debts even if you need to negotiate a payment plan. Get errors on your credit report fixed. You can do this through sites like CreditKarma.
- What are home prices like where you want to live? If your area has incredibly high home prices, it might be time to rent and wait for the market to adjust.
- Do you have a down payment? Even if you're going to try for a VA loan with little or no down payment, you should have a nest egg for inspections, closing costs, etc. You will also want to make sure that have money in case any appliances need to be repaired or you have roof problems.
- Is your job stable? While no one has perfect job security, you need to make sure that the job you have is going to be there once you buy the house.
- Have you looked to the future of your neighborhood? Some neighborhoods are in decline. You don't want to buy a house in an area where you might lose your investment to a neighborhood that's getting rougher and less desirable.
Compare rental rate versus a mortgage. You can calculate a mortgage easily using an online calculator. Be sure to include insurance, taxes, etc. that must all be paid. To guess at your interest, look for a site that breaks out mortgage rates based on your current credit rating. Talking with a lender will get you more detailed information about rates and payments. It is highly recommended to speak with a lender.
Cost of Home Ownership
Another potentially huge cost is the cost of repairs. Furnaces, roofs, and more can all cost thousands of dollars. If you don't have the money in savings, you can find yourself struggling. It's wise to make sure you have some money or a flexible line of credit to tap into if you need to.
Think about these issues while you debate buying a home. The most important factor is desire. Do you really want to own a house? If yes, then you can start getting your ducks in a row to make that happen.