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Rent or Buy | That is the question


Many people have the perception that they just cannot buy a home…many people think it’s not a buyer’s market…but we have news for you. There are many compelling reasons to purchase a home.
The first question you should ask yourself is if buying a home makes more sense financially than renting a home. You must consider the amount of money spent over time minus the value of a home if and when you sell it. Also, the time you plan to own the home is a significant factor.
3 things to consider when determining whether you want to rent or buy:
1. Is the price right? You should spend no more than 30% of your after tax income on housing costs.
2. How long will I stay? If you’re not there for at least 2 years, you may want to rent.
3. Flexibility or investment? You may be at a stage in your life or your career where you want to be able to move to pursue opportunities….or you may be ready to establish some roots.
Once you decide you’re ready to move forward with purchasing a home, you should meet with a lender and determine if you qualify for mortgage—and how much you qualify for. Here are a few significant factors considered when applying for a mortgage:
• Credit Score. You typically need a credit score of at least 620 or higher to qualify for a mortgage. The lowest interest rates are available to borrowers with a credit score of 740 and above.
• Income. You must prove that you have a steady income and can afford to repay your mortgage.
Debt-to-Income Ratio. Your lender compares the minimum payments on all outstanding debt to your gross monthly income. While the maximum allowable ratio varies by lender, most will not go above 41% to 45% for an overall debt-to-income ratio.
• Assets. You need to prove you have the savings to pay for a down payment and closings costs, as well as have some cash reserves in the bank.
The plus side of Buying
• Build equity over time
• Get tax credit when you itemize on federal income taxes
• Consider your home as an investment
• Be settled and make it the home you’ve always wanted

If you fall short on any of the above criteria, you may be better off renting until you can improve your credit score and save more money.
The plus side of Renting:
• No maintenance required
• It’s easier to move
• You can avoid a depreciating asset
Buying a home can be intimidating—but also exciting! The more you know before you begin the process, the better off you will be.

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