To a lot of people, the house with the white picket fence is the American dream. Many people feel that buying a house is normal in society, that it would be weird to just rent.
Well, I’m here to tell you that one isn’t better than the other. It is merely based on the situation you are currently at in your life.
- Are you a single person just getting out of college?
- Do you have a significant other or a stable job?
- Do you want to start a family?
- What does your income look like?
- Is it cheaper to buy or build a house?
These are all questions that you must ask yourself before buying a home. In today’s article, I am going to be breaking down which decision is better for certain scenarios and why.
1. Return On Investment
Most people look into buying a house without even thinking of all of the costs associated with that house. All they are really looking at is the mortgage payment.
However, you have other costs in there such as maintenance and repair, closing costs, interest payments, etc. And unless you have a really good credit score where you can get a super good loan for a 15 year fixed rate mortgage, forget about it.
Financial guru Dave Ramsey even advises that you pay off all debt before buying a house as this will keep you more financially grounded. If you are drowning in debt, just rent and work a lot of hours until you get in cleared up.
Also, it is important to save up 3-6 months of expenses before buying a home as well. When looking at your mortgage, find out how much you are going to be paying in interest over the course of the loan to see if it would be a better option renting.
In the end, you must make sure that your house payment does not exceed 25% of your take-home pay every month.
For example, if you and your spouse take home $6,000 a month, your house payment shouldn’t be over $1,500 a month.
If it is, you would then be considered house poor which would create a lot of financial strain in your life and your marriage.
Young couple and young people, in general, want to rush into buying a home because they want to settle down. Trust me, I get it. But have you guys factored in where you are in your lives?
If there is a lot of uncertainty in your job market or you just want to leave where you are at to seek out better opportunities, getting strapped down to a mortgage may not be your best bet.
If you buy a house but then get a phenomenal job offer months or maybe even a couple of years down the line, it may result in you either having to:
- Decline the job offer
- Fire sell your home
- Have two payments for a while as you wait to sell your home
None of these are good situations. You’ll have to pay closing costs and may even lose money on your home due to this urgency. This scenario that I just outlined would be a perfect scenario for a young couple to rent.
You can pay off your lease quick or you may not even have to depending on where you are living. In the end, it just makes for an easier process.
One of the biggest downfalls of owning a home in that once you pay into it, it is hard to access the equity in it unless you sell it. The only real way to do this would be through a HELOC or a home equity line of credit.
On average, American homes have increased 1% in value over the past years. On the contrary, the stock market has averaged a 9.8% return.
As you can see, it may make sense for a person or a couple to rent for a few years, putting their would-be interest payments on a house into the stock market.
Especially if they are young, it will give their investments time to grow over the long run. It would be more growth than their house would see.
Let’s face the cold hard fact that location does matter. Someone buying a house in San Francisco in the 70s versus someone buying a house in Detroit in the 70s, both individuals are currently in two polar opposite worlds when it comes to the real estate market.
One person’s house has increased dramatically while the other might have lost money on their property. This is why you need to get familiar with the real estate market that you are looking to move to.
One of the best ways to do this would be to contact a realtor in the area. Find out questions to ask a realtor and then contact them. In the end, you want to be in a market that is appreciating.
One of the largest growing real estate markets in America would have to be Florida, especially Orlando Realty and Lake Nona Realty.
These locations are directly by Disney World, Universal Studios, and a bunch of other cool sites. If you are looking to get into this market, it would be smart to contact a professional realtor in Orlando Fl.
All in all, it may be very smart to buy house in Orlando. The no state income tax and the growing economy makes it a very appealing location to many families.