The realization of the American dream has always been to find a good career path and then own a home. It’s the ultimate achievement, especially when you’ve found a home with the exposed bricks, a front porch, and a backyard to later turn into a garden. It’s a physical manifestation of your hard work, so you’ll naturally be drawn to purchasing a home. The prospect is indeed inviting, but many others end up regretting it—mainly due to the unexpected maintenance and hidden costs of purchasing one.
For this reason, most people end up going for an alternative option—renting. It’s definitely cheaper in the real estate industry, making it the perfect safety net before being financially stable enough to purchase a home. But how do you know when’s the right time to purchase or rent?
Answering that question can be a little tricky, but we’ve created this quick guide to help you out. Consider the following steps:
Step 1: Consider your current financial situation
Before purchasing or renting a space, it’s paramount that you dig deeper into your finances and figure out what you can afford. Make sure to consider the following elements:
- Your emergency savings fund: If you’re adamant about buying a home, make sure you have at least six month’s worth of expenses in your emergency fund. Having cash reserves ensures you can survive your first few months of adjusting, making sure that you’re all set for utility and maintenance costs. More importantly, however, having an emergency savings fund attests to one crucial fact: you’re in a good financial position.
- The necessary down payment: While it’s entirely possible to purchase a home with only as little as 3% of the purchase price as a down payment, keep in mind that this will only mean more debt in the long run. For this reason, it’s important to have at least 20% of the total purchase price to offer as a down payment.
- Your credit score: The higher your score, the better your chances of getting approved for a mortgage loan. In most cases, you’ll also have access to lower interest rates, which will serve you more in the long run.
Step 2: Gauge the property’s various elements
Apart from considering your financial standing, it’s also critical that you scrutinize the prospective property’s area carefully. This should also include the size you wish to rent or purchase, the amenities you can enjoy, the overall design, and other fees and costs. It’s also important that your lifestyle will play a huge part in your location decision, meaning that proximity must be taken into account.
Are you comfortable with living in the city alone, or will a home away from the bustle be better? Any possible repairs, renovations, taxes, and insurance must also be taken into account. When it comes to rentals, these things will be taken out of the equation—your landlord will be responsible for everything. As a homeowner, however, you need to take full responsibility!
Step 3: Consider the rest of your life
After all your research and you still haven’t figured out what to do, it’s time to consider the current course of your life. You may want to stay renting for now, especially if you still do not have enough cash for a huge down payment rate. You may also opt to purchase a home now, especially if the near future means getting married, starting a family, or settling for a career you’re passionate about.
The Bottom Line
When it comes down to it, remember that your chosen property shouldn’t reflect anything at all! Purchasing a home isn’t the actualization of a good life, nor renting means an immature financial life. Depending on your current needs, renting may be the best option, especially if you still wish to navigate through life. If you’re ready to settle down, however, then a home may be the best choice. Simply put, it’s all about what you need.
If you’re ready to pursue the homeowner life, the Performance Mortgage LLC has you covered. We offer you the best financial services in New Orleans, especially since our lending solutions are always designed to fit your unique borrowing needs. Apply for a mortgage today!