Should I Rent or Buy a Home?
Perhaps you have been renting for a couple of years and begin thinking to yourself, “Am I throwing my money away? Should I go ahead and take the plunge and purchase a home? After all, it is the American Dream, right?” Sure, but it takes more than dreaming. This could be one of the biggest decisions of your life, so before you “take the plunge” here are some things to ask yourself.
Am I Financially Ready?
Buying a house usually involves a down payment and a commitment to pay a monthly mortgage for the next 5 to 30 years. There are other costs as well such as insurance, maintenance, and perhaps home owner’s association fees, but let’s start with the basics.
Down payment:
This is the lump sum you will pay upfront that shows lenders that you are financially able to make this commitment. Down payments can vary anywhere from 5% to 20%, but a 20% down payment is often preferred and will most likely get you the lowest rates. If you are not prepared with a down payment, then take some more time to save up and carefully consider if now is the right time to purchase.
Monthly Mortgage payment:
This is your monthly commitment to the loan that you will make throughout the term of the loan. Remember that putting down a larger down payment can reduce your monthly payment. Another thing to consider in your monthly payment is insurance and taxes. Often, lenders will add these into the monthly note (called escrow) which could add a substantial amount on top of your regular note. So, if two to three hundred dollars per month will put a strain on your finances, consider your options – buying a less expensive house or spending some more time saving up for this investment.
Am I Emotionally Ready?
We’ve discussed the financial commitments of purchasing a home, but when deciding between whether to rent or buy there is also an emotional commitment as well to take into account! You need to be confident about choosing a neighborhood, and you’ll have maintenance to keep up with like the lawn and gutters and the occasional home maintenance issue. When you’re renting, those things are handled by your leasing company, but in your own home they are suddenly your responsibility! You face the trade-off between what you want to do and what you HAVE to do when you own your own home. But it’s not all bad! Taking care of your biggest investment can be gratifying, when you are emotionally ready to take that leap!
Do I Have the Skills?
No matter how new or old your home is, over time it will require some maintenance. You will need some basic handyman experience so that it will not cost you an arm and a leg to get the work done. Here are a few things to be ready for in Homeowner 101:
- Operating your breaker box. Know where it is located and label the switches to make it easier down the road.
- Changing an air conditioning filter.
- Knowing where water main valve is and how to shut it off.
- Cleaning the fireplace flue.
- Changing a toilet flapper.
- Changing smoke detector batteries.
- Locating studs to hang shelves and pictures.
Home ownership is an exciting and gratifying adventure, and taking these important steps to be ready will give you peace of mind and increase the joy of ownership. It’s not something to rush into, so take your time, consult a financial adviser, run the numbers, and make sure that now is the right time for you. Eastex is here to help you make wise financial decisions and have many savings options for you to choose from! Contact one of our member service representatives to find out how your Credit Union can help you financially prepare for home ownership!
