Buying a home vs Renting - Understanding & knowing the difference - Part 1 of 3

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

throwing money out the window - from istockphoto

In today's economy, you will hear many different rhymes of reason why to rent now or why to buy a new home now.  Ultimately it comes down to your own decision and you should only use such news with caution.

You might have heard some say, don't buy now because home values will decrease another 5% to 20%. Remember, real estate is local. In some areas, home values have already increased by 10%.  So get to know your area and speak to a qualified realtor about this. Here is a good post showing you even if home values dropped, that waiting might not be such a good idea. Home prices will drop, so wait until next year??

You will also hear so many say that right now is the best time to buy, because interest rates are extremely low and so are home prices. There is a lot of truth to this, but again, you need to look at it from both sides of the fence.

So, are you throwing money out the window if renting?  Yes, but this could be a complicated topic based on so many issues. Word of advice : Be careful of such online tools as renting vs buying calculators. Each one is not the same and some lack important details.

 

 

When should you not buy a home?

  • If your rent is very low. (usually 20% or less of your gross monthly income) If you like the area and will probably buy in the area, maybe save for one more year.
  • You intend to move in a few years.

 

Things to think about prior to buying a home.  When you buy a home, you still have expenses unlike renting.

  • maintenance of the home
  • original closing costs when buying the home
  • monthly property taxes & yearly homeowners insurance (both of which are usually in the mortgage payment)
  • sometimes mortgage insurance depending on your down payment and the type of loan

 

 

So I have mentioned some negative reasons why not to buy a house and that confuses you a little. It's because the positive reasons will outweigh the negative reasons of buying a home. Key word being usually. Your home can become your own personal bank.

Positive reasons for buying a home 

  • You can write off the interest yearly
  • You will build equity in your home on a monthly basis, unlike when you rent.
  • You can deduct the points that you paid when purchasing, the 1st year, that's if you pay points.
  • Your home will usually appreciate, becoming more valuable over time. Ignore what has happened in the last 3 years with values plummeting. Values had increased to quickly and this happened for several reasons.
  • Pride :  The home is yours. You can basically do what you want, within reason.
  • Once your home is paid off, you just have yearly taxes and homeowners
  • Creating memories - Since the home would be yours, you will creative ever lasting memories, especially if you have a family.

 

 

Conclusion : Overall, this could very well be the best time to buy.  Home values have dropped in many places and they are now leveling out, stabilizing.  Also, rates are still low.... anything from 4% to 4.75%. And no, you don't need 20% down or 720 credit scores to buy now. I will go over this later. You just need to have a plan, feel comfortable, know your goals, and have weighed all your options to help make your decision when deciding to rent or buy a new home.

 

In Part 2 : I will talk about comparing renting vs buying in dollar figures. - The pros & cons -

 

 

 

 

 

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Lori Mode 10/06/2010 04:01 AM
  2. Charles Stallions Property Manager 01/28/2013 12:23 PM
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Rainer
28,007
Alan Bruzee
Long & Foster Real Estate, Inc. - Rockville, MD

There is a lot that goes into buying a home, pick a good one as you might be in it for a while.

Sep 23, 2010 03:16 AM #1
Rainmaker
159,631
Deborah "Dee Dee" Garvin
C2 Financial - San Diego, CA
C2 Financial

Jeff,  Great information and much more detailed than a rent vs. own flyer.  This can be very helpful for both agents and consumers!

Sep 23, 2010 03:18 AM #2
Rainmaker
355,183
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

Jeff, great points!  I think a lot of people lose sight of the fact that they are going to pay to live somewhere.  Many people know that they are never going to leave the family, job and friends that they have where they currently live.  If that is the case and they can buy as cheap as rent, the upside is too great to keep delaying.

In our area, you can buy a $150,000 house for what you can rent a 2 bedroom Townhouse.  $150,000 in our area will buy you a 3 bedroom 1.5 - 2 bath home.  That math works everytime.

Sep 23, 2010 03:56 AM #3
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

ALAN... .  yes, there is a ot that goes into buying a home, in which I will be doing a first time homebuyers series also.  thanks

DEBORAH... .  I think anything like this will be better than a rent vs buy flyer.  There is much more to know & to think about than just payments.  And thanks for the compliment.

DAMON... . that's an excellent point, that you are usually going to pay someone no matter where you live. And yes, in some areas, it actually might be cheaper to own than to rent.  Thanks and thanks for the polite compliment.

 

Sep 23, 2010 04:13 AM #4
Ambassador
648,484
Marilyn Boudreaux
Marilyn Boudreaux, Century 21 Bono Realty - Lake Charles, LA
Lake Charles LA Century 21 Realtor

You have to live someone why not make it your own!  I look forward to the next post with the $$ broken down to show renters!  I do believe alot are taking advantage of the rates just got one under contract and noticed the address buyer listed was an apt.  I have done mailouts to the complexes in the past with pretty good luck, only bad luck was the calls I got were renters with bad credit LOL

Sep 23, 2010 04:14 AM #5
Rainmaker
1,289,786
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Jeff:  Real estate and lending is all about the individual now and is more personalized than ever.  There are so many factors that figure into a decision to buy or rent that are truly personalized to the buyer.  No one can make broad statements regarding the wisdom of any transaction anymore.  It's become the same way with rates.  How can a lender issue rate sheets?  They can be so misunderstood and with rates changing as quickly as they do ... not worth the paper they're printed on within seconds. 

You state a strong case for dealing with professionals here.  The truth of an individual's readiness or ability to buy cannot be revealed until they've have that all-important conversation with a lender.  That fact cannot be over-stated ...    Good post!

Gene  

Sep 23, 2010 04:38 AM #6
Rainer
73,822
Pam Pugmire
Silvercreek Realty Group - Meridian, ID
Meridian Idaho Real Estate

Jeff, this looks like it will be a great series.  

I appreciate that you are pointing out all aspects of the rent/buy scenario.  As a real estate agent, I think buying a home is a good choice, but I also recognize that it has to be at the right time for each individual person.  It's definitely not a one-size-fits-all answer.  

Sep 23, 2010 04:43 AM #7
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

MARILYN.... . excellent point... but not every even thinks that they can buy... or you have some of these yahoo realtors that say you must have 20% down and excellent credit.  We need to show the average consumer that it can be done, with a little help and elbow grease... and if not now, 6 months to a year from now.  And I know about those complex mailers... many with bad credit, but you can get some that way.. it can work.

GENE... . it certainly is more personalized now than ever before.. yet some still want to choose that person that didn't fully educate them.. and even after they find out, they still stay with them because that person was nice or out of loyalty.. that part cracks me up in a sad way. Overall, yes, they need a sit down with that loan officer, a true professional.. not one that fills that person's head with numbers and nothing else.  And thanks for the compliment.

PAM.... .  I love pointing things out.. many times, people don't do this... and it just becomes a quick sale to them, that turns me off. And yes, one size does not fit all.. I just hope the rest of the series turns out good.  thanks and thanks for the compliment.

 

Sep 23, 2010 04:54 PM #8
Rainmaker
1,155,890
Al Raymondi
Ocean View Realty Group in Ormond By The Sea Florida - Ormond Beach, FL
Ormond By The Sea Florida - Home and Condo Sales

Good summary of the rent vs buy situation Jeff.  Often people look at it as just a math issue when there are many other considerations including what if the landlord decides to increase your rent or decides to not renew the lease.

Sep 24, 2010 03:29 AM #9
Ambassador
1,514,247
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I received an abundance of Rent VS Buy contributions yesterday and it sparked a topic for me!  Thanks so much and I can't wait to see the rest of the series!

Sep 24, 2010 06:44 AM #10
Rainmaker
493,539
Lori Mode
The Mode Real Estate Group - Elk Grove, CA
Real Estate Made Simple

Jeff - great summary!  So many renters don't understand that they can buy and actually when it makes sense for them to do so.  If its ok, I think I will reblog this series!  It's so important right now to educate potential buyers.

Oct 06, 2010 03:58 AM #11
Rainmaker
1,304,888
Charles Stallions Property Manager
Charles Stallions Real Estate Services - Pace, FL
Pensacola, Pace & Gulf Breeze Property Management

Thanks Jeff for taking the time to right a great post that will help us all.

Jan 28, 2013 12:47 PM #12
Rainmaker
1,277,994
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

In our area, high-income new residents would buy if they were going to be in the area for 3 or more years; however, NOW, they need to see remaining in the area at least 5 years to make the PURCHASE of a local home a viable option.

I am NOT surprised that may of my residents over the last 2 years have made over $250,000 and do not want to buy!

Jan 28, 2013 07:11 PM #13
Rainmaker
1,508,825
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

Many would-be home buyers are caught in a catch-22: They cannot afford a down payment because they are putting so much money toward rent, and the reason they are putting so much money toward rent is they can't afford a down payment. 

Nov 16, 2015 11:32 AM #14
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