Should you Buy or Rent your Next Home?
It’s a conundrum faced by people every day: when is the right time to buy a home? While websites such as Trulia.com can provide you with a rent vs. buy calculator and tell you what the local market looks like, the decision to buy should be a completely personal choice based on both emotion and financial sense. According to Trulia, it’s 41 percent cheaper to buy in the Washington, D.C. metro area right now. The combination of rising rents, low mortgage rates and relatively more affordable homes than pre-housing crisis days has created a scenario in which many would-be buyers have decided the time is right to buy a home. But just because everyone else has made that decision doesn’t mean it’s necessarily right for you.
Here are some of the factors that should go into your choice to rent or buy:
• Are you emotionally ready to buy? Buying a home requires a long-term commitment to a neighborhood and a property. While some real estate investors manage to buy and flip, most financial planners and real estate agents recommend that you keep your home for five to seven years in order to pay down the mortgage balance, to allow the home time to gain value and to recoup the costs of purchasing a home.
• Is your job stable? If you are in the midst of a job hunt or are worried that you could lose your job, then it’s not the right time to buy a home. Not only will lenders be looking at your employment history and the security of your future income, but you don’t want to be tied to a home if you need to look for new employment in a year or so.
• Are you ready to take care of a home? While not every homeowner is DIY expert, you should be willing to take care of some tasks yourself and to budget for outside help when you need it. If you purchase a new home, you’re less likely to have to do major repairs, at least for a few years.
A homebuyer education class can help you decide if you are ready to buy. In Charles County, you can find information about first-time homebuyer programs, down payment assistance and homebuyer classes athttp://www.charlescountymd.gov/CS/housing/housing-authority andhttp://www.mmprogram.org/counseling.aspx#2
If you have decided to buy, it’s time to look into your finances. While you can certainly look at new and existing homes before you discuss your finances with a lender, you’re better off scheduling a free appointment with a lender before you start seriously shopping for a home. You don’t want to risk falling in love with a home you can’t afford.
Meeting with a Lender
While the prospect of baring your financial soul to a mortgage lender may be daunting, keep in mind that lenders want to approve your loan if they can. If you can’t qualify right away, a good lender will help you develop a plan to increase your savings or improve your credit so that you can obtain a mortgage in the future. A lender will explain the pros and cons of various loan options, such as conventional, FHA, VA and USDA Rural Housing loans.
A lender can pull your credit report and share it with you, but you can also get a free credit report (and you should) each year from each of the three credit bureaus at www.annualcreditreport.com. Review your report to make sure there aren’t any mistakes on it because it can take time to correct them.
Michele Lerner is a freelance writer who specializes in real estate and finance and is the author of "HOMEBUYING: Tough Times, First Time, Any Time" available now at www.MicheleLerner.com