Home ownership is an immense responsibility – and one that an ever-increasing number of people choose not to embrace. While the benefits of renting your home or apartment include stress-free maintenance and the simplicity of rent, owning a home requires footing all the bills and dealing with all of the repairs.
Regardless of economic conditions, there are millions each year who buy homes. However, not everybody exercises good judgment in deciding when, where, and if they should buy. To give you a better idea of when buying a home makes sense, let’s examine some factors and help you make the right decision based on your exact circumstances.
Evaluating Your Rental Situation
For most, the idea of owning a home is fantastic. However, the cost of homeownership is a primary concern in determining whether to buy or rent. Determining when to buy and when to rent takes some careful consideration.
Most experts suggest that if/once the cost of renting a comparable space exceeds the cost of a potential mortgage by 10% or more, then it is time to consider buying. That extra 10% you’ll be saving on the mortgage will still need to be set aside for insurance, future repairs, and taxes, but you’ll be working toward owning the home rather than paying extra for the privilege of renting.
Examining the Housing Market
A close and careful examination of housing market trends is crucial in ensuring that you get the most value from your home’s purchase. For example, those who bought homes in 2005 suffered substantially compared to those who purchased just five years later.
Housing values can fluctuate wildly during economic upturns or downturns, dramatically affecting your mortgage’s relative value for better or worse. Housing Predictor Values provides a comprehensive look at housing markets in each state. Other factors such as economic growth, stock market trends and financial industry analysis are also important to evaluate.
Considering Your Income
Homeownership presents a permanence that renting does not: in most cases, you’re making a 15 or 30-year commitment. As such, it is vital to consider your current income and occupational situation, and how that might affect the long-term ability to pay your mortgage.
Ultimately, most financial experts recommend purchasing a home that does not result in more than 30% of your income being consumed by the mortgage. In some areas, this might not be possible: many in the market for a new home subsequently consider looking at different metro areas and markets if affordable housing is not available where they currently live.
Contemplating the Future
Many individuals and couples decide to buy a home when they enter a certain phase in their lives. Most commonly, a new child can create new requirements and considerations that were not previously important in picking the right accommodations.
If your current living arrangements suddenly present a challenge in terms of space, neighborhood quality or school selection, then purchasing a new home may be the best solution – even if other considerations such as market forecasts do not suggest now is the right time to buy.
There are many factors that can influence when and if it’s the right time to buy a home. From personal finances and relationships to market conditions and current living situation, consider these elements carefully in conjunction with one another to make the right decision regarding ownership.