Yes, yes, the title says it all. Most of us are faced with this decision at one point in our lives. I frequently meet people in this position. When asked if they have considered buying a home, I sometimes hear “My lease ends in one month and I think I’m going to renew it.” Of course, I understand their struggle and I’m supportive. As a Broker, my job is not just to sell homes, but to ensure that the individuals I meet fully understand their options.
Let us avoid the third option of living with your parents; and focus on renting vs. buying. Renting is a great option if you travel a lot, are uncertain of your future or need to save money for a down payment. It’s great to move into a home that has property management; your bills are itemized, you have covered parking, are usually close to restaurants and maybe you even have a gym. The only problem is, where is your money going?
Good news! It’s not necessary to have the next 15 years of your life planned before you buy. You can travel and have an uncertain future, but still own a home. Consider investing in a home. If you travel, maybe you could rent it out. If your future plans change, you can either sell or rent your property until you decide to sell. Either way, you still have an ROI (return on investment).
One of the most important factors that are often overlooked is how much money you save. Saving for a down payment can be challenging. There are several options to consider though: FHA, VA, USDA, Conventional or Insured Conventional. It’s not always necessary to put down 20%. FHA loans allow you to put down between 3%-20%. VA loans often require no money down since they are Federally-backed. If you are a 30% or greater disabled Veteran, you are exempt of the VA funding fee as well!
One of the most exciting parts of paying a mortgage vs. paying rent is that your payments are often times cheaper. I recently had a client that was looking for a 3-bedroom apartment. Units in the particular area they were interested in cost $2,300 per month. Once I explained that a monthly mortgage for a home the same size could cost as low as $1,000 per month, the decision was easy for them to make. Remember, whether you’re renting or buying, you’re always paying a mortgage. Will it be your own or someone else’s?
If you choose not to do either, well, your parents would be happy to clean out the sewing room for you!