Buying a home is a long-term financial commitment. So, it’s important to know whether you’re ready to buy a home, or if you should continue to rent.
Buying vs. Renting
A major benefit of owning a home is the accumulation of equity. A portion of every mortgage payment, in most cases, is applied to the principal, which increases the homeowner’s equity. So, when homeowners decide to sell their home, they often realize a profit because of their equity. The profit from the sale can be applied to purchasing another home, retirement savings, or anything else.
Though renters do not have equity in the property, renting a home can be beneficial for several reasons. If you’re planning to live in an area for a short time, renting may be a better option than buying a home. Renting also allows greater flexibility for moving to a different home that better suits your needs. Furthermore, renting includes little to no obligation for maintaining the home.
Affordability of a Home
For most people, a home is likely the largest purchase of their life. Although the cost of purchasing a home is high, prospective homebuyers should understand the affordability of a home purchase.
Affordability can be measured in a few ways. The simplest way to judge affordability is to look at your existing budget and estimate how much you can afford for a monthly mortgage payment. Realistically, mortgage payments should not be more than 28-30% of your gross income.
The cost of the home itself is not the only relevant figure in determining if you can afford to buy a home. Along with the price of the property, you must also consider the closing costs, down payment, earnest money, repairs for personalization, and the cost of moving. Remember to include these costs in your final calculations to understand if you can afford to buy a home.
Financing a Home Purchase
Qualifying for a home mortgage plays a large role in determining if you are ready to buy a home. You may be ready to buy a home from a financial perspective if:
- You have a good credit score.
- You have an acceptable debt-to-income ratio (DTI).
- You have access to specialty loan products, such as a VA loan or homebuying assistance program.
Analyzing the Real Estate Market
Market conditions are relevant if there is no immediate need to purchase a home. If you do not have a pressing need to purchase a home quickly, you have the option to wait until conditions improve.
However, if homeownership is immediately necessary, such as selling a home and moving for a job, it’s often better to purchase a home under current conditions rather than delaying.
Real estate market conditions include current interest rates, average home values, the competitiveness of the housing market, and the availability of suitable homes. These and other factors give context to the market in which you will purchase a home.
Responsibility of Homeownership
Before buying a home, it’s important to determine if you want the responsibilities of homeownership at your present stage of life. Often times, people in the earlier or later stages of life do not want the responsibility of owning and maintaining a home.
Homes require regular upkeep, repairs, and maintenance. Along with this, homeowners must consistently make mortgage payments, while also dealing with property taxes and homeowners insurance.
Understanding Your Motivations
Ultimately, buying a home is a personal decision. Before making a final decision to buy a home, it’s important to understand the motivation behind the purchase. Common personal motivations include:
- Pride in homeownership.
- Tax benefits.
- Wealth building.
- Personal security.
- Investing in the future.
Identifying the motivation behind your desire to purchase a home is valuable. Once the motivation is known, you can discover if there is a solid basis for purchasing a home in the near future or if it should be delayed. This will help to determine if it’s the right time to purchase a home or if waiting is a better course of action.
Marimark Realty is a full-service real estate company in Tampa, Florida. Our focus is on providing a personalized experience for both buyers and sellers of residential and commercial properties, as well as investors.
To begin the journey of purchasing or selling your home, or purchasing commercial or investment properties, contact us at your earliest convenience.