Is it Best to Rent or Buy
With all the turmoil in the real estate market over recent years, many consumers are left wondering what their best move is. There are pros and cons to both renting and buying, so either way you go you are going to be gaining some advantages while losing others. These questions are especially pertinent in areas where the real estate market is growing and gaining stability, like Durham, N.C. Moving companies have reported increase in business as well due to this escalating demand. Obviously it is best to get in on the ground floor of such growth before home prices outpace your buying capabilities, but it is vital that you don’t allow escalating prices to rush you into a commitment you can’t handle. There are a few key factors to consider when making this decision, and these will tell you if it is the right time to move or not.
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Real estate realities.
One of the key elements in the recent downturn in the real estate market was buyers chomping off more than they could chew. The wide availability of FHA mortgages at record-low interest rates and down contributions, as well as the tax credits that were available to first-time home buyers, caused many people to spring for homes at prices that were far outside their means. As a result, FHA guidelines have tightened up since then, and many of the tax incentives have expired. This has made it slightly less feasible to qualify for a home that is too expensive, but many lenders will still qualify buyers for homes provided they can put 5% down and the mortgage payment is no more than 36% of monthly income.
Most financial gurus say that this is still far too demanding an arrangement to consider. To make purchasing a home a fiscally responsible decision, it is recommended that you save until you can put at least 10% down, and 20% is really the ideal figure. Furthermore, you shouldn’t consider buying a home whose price is at the upper end of what you qualify for. Try to keep mortgage payments at about 25% of monthly income, because you need to have wiggle room if something goes wrong.
In addition to having the requisite down money, you should also have emergency money stashed away. Most experts recommend keeping savings in the amount of three to six months’ worth of expenses, so that if you lose your job or have unexpected medical bills, you will not have to lose the home as well.
Additionally, unless you have a tremendous amount of income and plan to keep the property as a rental, it is often better to rent when you are only going to be living in a certain place for a few years. Most of the time, it can take between 5 and 15 years before the cost of home ownership becomes fiscally more sound than the cost of renting. During this time, until the premium is paid down and the land value escalates, you will owe more on the house than it is worth. If you plan to live there long-term and you meet the above standards of financial preparedness, then you should definitely consider buying soon. For while it is true that you want to be sure you are making the smart move, you don’t want to hesitate too long either. Land values and interest rates are both on the rise, and are unlikely to be this low again anytime soon.
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