Buy or Rent (Article)
Buy or Rent
Since the housing downturn and Great Recession of 2008-09, housing prices have seen a steady rise. With housing prices continuing to trend up, you may be wondering if this is the time to buy your first home before prices go higher. With that said, each situation is unique and has to be considered individually.
When it comes to buying you have to do your homework before making an emotional purchase you can’t afford. Having a sizeable down payment is key, the closer to 20% the better since a 20% down payment will allow you to avoid the requirement of private mortgage insurance. A larger down payment will also lower your monthly mortgage payment as well as save money on interest since you will be borrowing less.
To avoid becoming “house poor”, keep your monthly mortgage payment between 25-28% of your take-home pay. The higher percentage going to your mortgage, the harder it will be to keep up with the other costs involved in owning a home, not to mention other costs of living.
If you don’t have 20% down or can’t find a home within your price range, perhaps renting for a time is your best bet. By renting, you avoid all the maintenance required as a home owner, freeing you up for other activities. If you have a written plan to eventually save up for a down payment and can find an affordable apartment, go ahead and rent until you can save up the cash needed for your down payment.
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