How to Make a Decision to Buy Vs. Rent a House
The decision to buy a house is a major one, and jumping into homeownership too soon can create financial pressures and other headaches. Renting is a better option for some people due to their credit and financial situation. If you are strongly considering owning your own place, make sure you understand what's involved in buying a house.
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Review your credit rating. Mortgage lenders require buyers to meet a minimum credit score to qualify for financing. Check your FICO score and review your credit reports to see if they reveal information that can disqualify you, such as collection accounts and charge-offs. Renting is a better option for people who need to clean up their credit.
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Evaluate your personal savings. Buying a home is costly, and you will need a minimum 5 percent down payment. In addition, closing costs can run from 3 to 5 percent of your loan amount. If renting, landlords typically require only an application fee and security deposit.
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Research neighborhoods in your area. Buying a home is a long-term commitment, and best if you plan to live in the home for many years. If you prefer moving every few years, or aren't convinced that you want to reside long-term in your current vicinity, renting might be a better option for you.
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Assess your free time and decide whether you want to be responsible for maintaining a house. People who rent can call their landlord to make repairs to the interior or exterior of a property. Defer buying a home if you don't have a lot of time to devote to a home's upkeep, or if you don't want to be financially accountable for large fixes.
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Examine the tax advantages and financial security. Renters don't gain equity, nor can they write-off rent payments. A property gains equity as owners pay down the mortgage and as the house value increases. Interest paid in mortgage payments is tax-deductible, which can significantly reduce an owner's tax liability. Buying is a better option for people who need to reduce their taxable income.
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