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 -