What's the rent situation in your area? If you live in a major metropolitan area, there is a risk that rents will continue to rise year–over–year and price you out financially.
What is your financial situation? Your financial and credit situation doesn't have to be perfect, especially if you are a first–time homebuyer. But just like other major financial situations, it's important to see if there are areas to improve (i.e. paying down debt from credit cards or student loans) that will weigh on your finances as you rent or buy.
How long are you going to stay? If you are planning to stay in the same region and you can see yourself moving into a home for around five years, buying your own home could be a great option to consider.
What's the cost of homeownership? When you purchase a home, the cost of ownership and repairs are all on your shoulders. That means you have to factor in future repair costs, especially if you purchase a house that needs a little TLC. The average home owner should figure on spending 1–3% of the home's value each year on property maintenance.
How much savings is needed? Renting requires some savings. You'll need enough to cover the first month's rent and any required deposits. To buy a home, there are some fantastic low and zero down options available, depending on your qualifications and the area you wish to live in. You may be able to take advantage of FHA's 3.5% low down payment loan that are very popular with first time and second time home buyers. There are also down payment assistance programs and down payment grant programs available in many areas.
There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize, however, that unless you are living with your parents rent–free, you are paying a mortgage – either yours or your landlord's .
As Entrepreneur Magazine , a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich”:
“While renting on a temporary basis isn't terrible, you should most certainly own the roof over your head if you're serious about your finances. It won't make you rich overnight, but by renting, you're paying someone else's mortgage. In effect, you're making someone else rich.”
Christina Boyle, Senior Vice President and head of the Single–Family Sales & Relationship Management organization at Freddie Mac, explains another benefit of securing a mortgage as opposed to paying rent:
“With a 30–year fixed rate mortgage, you'll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”
As an owner, your mortgage payment is a form of ‘forced savings' which allows you to build equity in your home that you can tap into later in life. As a renter, you can be guaranteed your landlord is the person building that equity.
Interest rates, while they have recently increased, are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac's latest report shows that rates across the country were at 4.4%: http://www.freddiemac.com/pmms/
Whether you are looking for a primary residence for the first time, or want to move up to your dream home, or are considering a vacation home on the shore, now may be the time to buy. You best bet is to understand your goals, know the numbers, create a plan and find out where you are at now. Talking with a mortgage lender is a great way to start. The mortgage lender can help you understand what price range and loan programs you qualify for today, how much cash you would need and can also let you know if there is anything you should focus on improving or adjusting within your personal finances which could help you secure the most favorable mortgage terms when you find that perfect home.
Potential buyers considering making the switch from renting to buying should engage an experienced home loan professional who can talk through the right financial topics and future plans. The first step is to reach out to us so we can get you connected with your employee home ownership program.
Don't Forget – As part of your EAP benefits through Cascade Centers, you have access to the Advantage Home Plus program which can help you get connected to trusted industry professionals such as mortgage professionals to help you explore your options. They will give potential buyers an analysis they can use to determine if they should keep renting or start looking for that dream home.