Should I buy a home or continue to rent?
The decision to buy a home is not an easy one to make.
Fortunately, there are some things you can examine about your situation to help you come to a great decision.
Do you want to stay mobile?
If you might move in the next few years, it’s likely a wise decision to continue to rent. Buying a home, then selling a few years later rarely pans out financially.
Think about what situations could come up:
- Work opportunities or job relocation
- Marriage or divorce
- Elderly parents in another part of the country
- Your current city is getting too expensive
- There aren’t many opportunities for your line of work in your area
Consider this: it costs about 9% of the home’s total price to sell it. Agent commissions, taxes, moving costs, and mortgage fees add up. It’s hard to break even on the sale if you’ve only owned the home a few years.
Consider home buying a long-term investment
Due to the high cost of selling, it pays to keep a house as long as possible.
That’s why you should go through a mental checklist before you buy
- Do I want to set down roots in this area?
- Is my job secure?
- Can I find another job in this area if I had to?
- Can I rent out this property if all else fails and I have to move?
For those who can answer “yes” to most of these types of questions, it’s probably a good choice to buy a home. Why? Because it puts you ahead financially.
Financial benefits of long-term homeownership
A study by the National Association of Homebuilders shows that, among homeowners, primary residences accounted for 62% of total assets. Even other assets like cars and retirement accounts were fairly insignificant in comparison.
It’s very hard to build a significant financial future without a home, in fact. You might be able to accumulate a decent amount in a retirement account if you’re savvy and disciplined about contributing — and start early.
But your chances of building up a retirement fund — and even retiring early — are much greater if your monthly housing costs go toward your future and not your landlord’s.
What if the home drops in value after I buy?
One big argument against buying a home is the fear of another 2008, hen home values in some areas plunged 50% or more.
That’s a real concern, and one not to be discounted.
There’s no guarantee that it won’t happen again. (However, it’s much more unlikely now that banks have practiced sensible lending over the last decade). But the majority of people have come out ahead, even if they purchased at the height of the bubble in 2006.
According to the National Association of Realtors, the average U.S. home price fully recovered from the housing downturn in 2015. Since then, home values have risen dramatically, and those who kept their homes have profited nicely.
The point is, there’s no guarantee that homes will maintain value. But there is a near guarantee that a home held for 15-20 years will net a nice return for its owner.
How do I get started buying a home?
The first step to buying a home, once you’ve decided it’s the right time, is to get a pre-approval letter from a lender. That document will tell you the price range you’re qualified for and will allow you to make an offer if you find the right home.
Check out our first article in this series: “What’s the first step to buying a home?”