With another recent cut in interest rates, you may be wondering if this is the right time to buy a home. Good rates on mortgages, in combination with more affordable home prices and more homes on the market, make this a great time to buy. Still unsure? Here are some important factors to consider when deciding to rent or buy a home:
TIME:How long will you be in this home? Renting makes the most sense for those who intend to be in the property less than two years. If your timeline is longer than two years, consider purchasing a home. Ownership over several years allows you to build equity in the home through market appreciation and mortgage principal payments.
SAVINGS: How much cash do have on hand? Those with little savings may not have the ability to afford a down payment or costs associated with buying a home. Although 100% financing options are still available, these mortgage products are harder to come by and even harder to qualify for. Lenders have tightened their guidelines significantly. If you are a buyer with solid credit and money in hand for a down payment, you are likely to qualify for a mortgage product with a very competitive rate.
CASH FLOW: Those with limited or sporadic cash flow may be better suited to renting. Although renters must meet monthly rent payments, there are few other costs associated with renting a home. Homeowners must not only meet monthly mortgage payments, but property taxes, home owners insurance, and annual home maintenance expenses as well. General guidelines suggest spending no more than 28% of your income on housing expenses. About 1% of your home’s value will be spent on annual maintenance fees.
Check back for Part 2 of this article.
