Buying a home versus renting is a monumental decision, and there are advantages and disadvantages to each option. As a matter of fact, according to the U.S. Census Bureau’s Pew Research Center analysis released in 2016, a towering percentage of American citizens are renting since 1965.
For some individuals, renting a house boils down to what they can pay for at the moment. The answer to “should you buy a home versus rent” is not completely settled or decided. You need to consider what you can afford, the duration you plan on staying, responsibility for home maintenance, as well as your family, career, and financial goals.
The debate on whether to buy a house or rent is undoubtedly a major and huge decision. It does not only have an effect on how much money you’ve left every month, but it also impacts your lifestyle as well. For a little help, we will walk you through the costs of each option to help you determine which is fitting for you. Read on!
Key Considerations of Buying a Home
Buying and owning a home demands a lot of upfront expenses. Some are paid at closing, while others are paid directly after the person who sells the house agrees to your buying offer. It is traditional to usher your buying offer with n earnest money account to guarantee the seller that you are serious and committed about acquiring the property.
This customary cost normally ranges from one percent to three percent of the purchase price of the home, relying upon the preference of the seller and the local market conditions. Once your purchase offer is accepted, the seller sends the earnest money check into a bond or deed account. The amount will be added to your closing costs.
Aside from the earnest money, you also need to pay the down payment. It is the percentage of the purchase price of the home that you pay upfront, usually or normally at closing. You must define or particularize a down payment in your buying offer, but you can adjust it before closing if the seller accepts the offer.
To make certain that the purchase price of the home matches the home’s actual value, lenders demand a home appraisal before approving your loan. It usually costs at least five hundred dollars and is paid before or during the appraisal.
Moreover, licensed home inspectors are experts in finding possible defects and problems that may be obvious to a naive home buyer doing a walk-through. Thus, homebuyers need to get one, although lenders hardly approve loan contingent on a completed home inspection. The home inspection cost is somewhat the same as the house appraisal. It’s normally paid at the actual home inspection.
Because property owners pay upfront property taxes, typically in a semi-annual, you must pay the seller for property taxes paid between the end of the existing tax period and closing date. Most probably, you’d be accountable for about six months of taxes, or none at all.
Private lenders demand proof of insurance before closing. Therefore, you must pay the premium upfront of the first year, either at closing or on the date you bought the policy. The insurance of homeowners differs based on the contents, location, style, and value of the home. Plus, your coverage limits, policy deductible, and credit score.
Relying on the local housing conditions, negotiations, and economic climate, the property seller, might agree to compensate you for a portion of or all of your closing expenses. So, before making a buying offer, do ask your real estate agent whether it is practical to contemplate the seller to cover or share closing costs in your existing market.
Other than these upfront and closing costs, buying and owning a home entails many recurring costs. These are loan payments, property taxes, homeowners insurance, private mortgage insurance, utilities, and maintenance.
Furthermore, buying and owning a home also involves one-time or special costs. These are furnishing, moving costs, repairs, and improvements and renovation projects. If you are a first-time homebuyer, check this list of best mattresses 2019 to save you time and effort from looking around.
Key Considerations of Renting Your Home
Renting your home does not entail an expensive buying process. Therefore, it has hardly any upfront costs. However, you might encounter some costs before you can finally move into your new home or apartment.
For the most part, landlords demand a security deposit to protect or cover against broken leases, delinquent rent, or repairs. Moreover, they also demand the rent upfront for the first month. And relying upon on the laws in your state, preferences of your landlord, and living situation, you might need to pay for nonrefundable deposits aside from your security deposit.
Also, you need to pay for moving costs, just like home buyers. The recurring costs are monthly rent, pet rent, renters insurance, utilities, and laundry.
Are you still undecided? Well, we cannot argue to that. It would be best to talk with an expert or real estate agent to guide you on your decision whether to buy a home or rent. Still, only you and your family have the final say, so keep an open mind as you go through your decision. Keep in mind that it is much better to hold back, wait, and form a decision rather than rushing into a decision that you will regret someday.
Analisse Weathers is a blogger and writer. She mainly writes about home improvement, home renovation, home repairs, and whatnot. Analisse loves to write these topics as she aspires to become an interior designer someday. In her spare time, she spends time with her family and friends.