Should I rent or should I buy? The renting vs. buying question is one many people encounter at some point. While some view renting as more affordable and less of a hassle, others see the value in owning a home and want nothing more than to rid themselves of difficult landlords or fellow tenants. Although renting may seem easier and less expensive, in the long run, all statistics show that owning a home is a better financial investment. Here are a few ways to consider whether owning a home is right for you.
While today's economic situation seems a bit daunting for most Americans, there is a silver lining. According to a study in The New York Times, now is a great time to buy for many people because prices are historically low. However, the study also provides potential home buyers with a ratio to help them determine whether buying is the right option: Divide the purchase price of the house with the annual cost of renting a similar one. An answer above 20 means you should at least consider renting, while a ratio below 20 makes buying a lot more appealing.
Length of Stay
How long you plan to stay in the house should also help you determine whether to rent or buy. For example, The New York Times also claims that for most people who stay in their homes for more than six years, buying is almost always a better option, providing them with an average savings of $1,743 per year. If you aren't staying for at least five years, renting might be a better alternative.
It is true that it takes stronger credit and a larger down payment to get into a home than it did several years ago. However, there are still a lot of options available to first-time home buyers, so don't let your financial situation rule out a purchase. The government offers FHA loans and loans for teachers, officers, firefighters and more. There are also many state programs that can help.
Finally, consider renting out one room of the new home you buy if you are worried about making payments. However, if you are married and securely employed, chances are that the mortgage payment will be easy to make. If you are temporarily employed or between jobs, consider waiting until you find a more secure job to make this transition.