Posted by: Kim_Hamilton on 02/14/2008 09:38 AM
Updated by: Kim_Hamilton on 02/14/2008 09:40 AM
Expires: 01/01/2013 12:00 AM
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Is It Better to Buy or Rent?~By JoAnn Stump
The market is ripe for buyers right now. Interest rates are low and might be heading lower. Naturally you should be telling your landlord goodbye and saying hello to your dream home, right? Before you do that you will need to examine all of the facts carefully. It all depends on your circumstance...
First of all I want to say that I think that what happened to a great deal of new home buyers that were given sub-prime loans and the aftermath is very sad indeed. I hope that the extreme negative publicity doesn’t discourage prospective new home buyers. Home ownership is critical to establishing security and stability in the future.
Buying a home is a large investment, and possibly the largest purchase you will ever make. Careful deliberation should be made when deciding which is better for you: rent or buy.
One advantage to being a renter is that your monthly costs are fixed. There’s little to no responsibility for maintenance of the property. The disadvantages are your rent typically increases each year and there is no guarantee that your lease will be renewed. In addition, you won’t earn equity nor will you reap the tax advantages of owning.
You also need to decide if you can really afford homeownership. If you are on a tight budget, it may not be wise to have the added pressure of maintenance costs, property taxes, and insurance. I recommend allowing the mortgage company collect impounds for taxes and insurance. That will allow you to budget a specific monthly amount with no surprises.
Here are some figures that may be enlightening:
Still Paying Rent? How much you will pay over time.
Monthly Rent
3 Years
10 Years
15 Years
30 Years
$ 400.00
$ 14,400.00
$ 48,000.00
$ 72,000.00
$ 144,000.00
$ 500.00
$ 18,000.00
$ 60,000.00
$ 90,000.00
$ 180,000.00
$ 600.00
$ 21,600.00
$ 72,000.00
$ 108,000.00
$ 216,000.00
$ 700.00
$ 25,200.00
$ 84,000.00
$ 126,000.00
$ 252,000.00
$ 800.00
$ 28,800.00
$ 96,000.00
$ 144,000.00
$ 288,000.00
$ 900.00
$ 32,400.00
$ 108,000.00
$ 162,000.00
$ 324,000.00
$ 1,000.00
$ 36,000.00
$ 120,000.00
$ 180,000.00
$ 360,000.00
$ 1,200.00
$ 43,200.00
$ 144,000.00
$ 216,000.00
$ 432,000.00
$ 1,500.00
$ 54,000.00
$ 180,000.00
$ 270,000.00
$ 540,000.00
$ 1,700.00
$ 61,200.00
$ 204,000.00
$ 306,000.00
$ 612,000.00
Besides costs, another factor to consider is how long you plan to reside in the home. When you purchase a home, there is a substantial initial investment including the down payment, and closing costs. It takes between five to seven years to recover your initial costs. Depending on your loan and the housing economy, it may take a few years to begin to see a return on your investment. There are also substantial costs in selling your home. If you don’t plan to stay at that address for at least five years, don’t buy.
Your credit score is a critical element to the home buying equation. If you have bad credit, don’t give up hope. You can systematically, over time, improve your credit score with a little work. It will affect the loan terms and interest rate available to you. Michelle Young at Michelle Young Financial offers free credit counseling. She can be reached at 209-753-7222, michelll@michelll.com
Now is a good time to consider being a homeowner. Your home can be your nest egg for the future and there is no better time to buy than now, if that time is right for you. Find a realtor and a lender you can trust and go shopping!
Jo Ann Stump can be reached at (888) 288-8915 or joannstump@mountain-realestate.com. Prudential California Realty, Arnold
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