What is a USDA loan? Pricing and eligibility

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Rent or buy: 5 steps to make your decision

1. Decide how long you plan to live in one place

In other words, are you planning to put down roots in your community or do you crave more flexibility?

If you are certain that you will stay in a house for at least 5 years, buying a house might make sense. This is because it could be a great solution both financially and emotionally – you can give your home a personal touch and make it feel like you own it.

However, renting is the best option if you prefer to be more nomadic. For example, let’s say you’re really hoping to get this promotion, but it’s across the country. You don’t want to have to deal with the hassle of selling a home while transitioning to a new role. Or maybe you’ve moved to a new area and want to take the time to get to know different neighborhoods before settling somewhere.

Sure, you can buy a house and sell it in a few years, but the costs are hardly worth it. Aside from the upfront closing and moving costs, you may have to pay more closing costs when selling a home in addition to other costs such as repairs and renovations that would cause the home to sell. best price.

2. Estimate the cost of the rental vs. Purchase

In many cases, renting can be cheaper than buying a home because of the upfront costs involved. This includes a down payment, closing costs, moving costs, renovations and other home maintenance tasks.

That said, just because you can afford a mortgage payment doesn’t mean you can afford a home; the expenses add up. In addition to a monthly payment that is greater than the principal and interest on your mortgage, you will also have property taxes, home insurance and (in many cases) mortgage insurance as well as owners association fees.

On the other hand, buying a home can be cheaper in the long run and it gives you the opportunity to build equity. (Hopefully your home will increase in value when you sell it.) In most parts of the United States, buying a home is actually cheaper, according to a report by the National Association of REALTORS® which shows that after 6 years the owner’s mortgage payment is lower. than that of a tenant. This assumes that the rent increases by 5% each year and the landlord pays a fixed monthly payment.

Not only that, but there are tax savings to owning (although with recent tax changes there may be limits on how much mortgage interest, state and local property taxes you can deduct) . But according to the same report from the National Association of REALTORS®, a landlord’s payment will be less than a tenant’s payment after 3 years.

That doesn’t mean you should dive straight into homeownership. It’s perfectly fine to rent for a few years, save, and buy a house if you are determined to have your own home. The cost savings of owning a home also assume that you will be staying in a house for the long term and may not factor in maintenance costs. However, if you pay off your mortgage and continue to live in the house, the savings can be considerably less, even with the costs of maintaining the house.

3. Mobility vs. Grounding: What is most important to you?

As cliché as it sounds, life is coming. Even with the best of intentions, it’s hard to predict what can happen next. If you plan to stay in one place for a long time and have the financial means to do so, buying a home may make more sense.

However, it is important to take a look at your current life situation and think about whether or not it will change over the next few years. Because if so, your housing needs might change as well (i.e. you might want to delay buying a home).

For example, you and your longtime partner may have just got engaged and are planning to get married within the next 2 years. In this case, the purchase may not make sense. Maybe you want to figure out how to combine your finances and set up your budgeting routine before you add a house to the mix.

Or let’s say you and your spouse have just gotten married and you’re not sure if you want to start a family yet. If you think you will have children soon, you shouldn’t buy a house that won’t be able to accommodate a growing family in a few years.

In both of these cases, it may be a good idea to rent for the time being so that you have time to figure out what you want in a home, what your budget needs are, and what type of home might best suit your lifestyle. . hope to have in the future.

4. Weigh the risks of renting and buying

As mentioned above, there are risks with both renting and buying a home. While you can build equity when buying a home, there are some financial risks. On the one hand, you could lose money if your local real estate market slows down. Or, if you sell your home sooner than you want, you may not be able to make up for what you spent on closing costs or renovations.

Let’s not forget the maintenance costs. These are expenses that you will have to pay to keep the house in top condition. Consider checking air filters and vents, testing fire alarms, landscaping, and fixing plumbing issues, among other things.

If you are focusing on other life goals, such as a career that requires you to travel often, or if you have to take care of several young children, adding housekeeping to your list of responsibilities may not be appropriate. not be the best choice.

On the flip side, leasing means that you won’t have the ability to build up equity like you would with the purchase. Your rent can go up at any time. You are also at the mercy of your landlord, for example when you are asked to move out or when you face deferred maintenance requests.

5. Assess your financial situation

It’s important to note that you need to be realistic about your financial situation when deciding between renting and buying. Once you’ve estimated the rental costs versus the purchase, be honest about whether you can afford other upfront costs like a advance payment, repairs, moving expenses and the purchase of new furniture. Consider using a mortgage calculator to estimate your monthly payments as well as how much home you can afford.

Either way, do some careful budgeting now so that no matter what you choose, you can afford a house or rent.

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