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Why buying a home may be wiser than renting:
Sure, while it may make more sense to rent than to buy over a short term of a few months, the equation can easily flip with buying being the best value for a homeowner planning to stay for at least five years and, in some cases, as few as two years, according to personal finance site NerdWallet.com
According to Hunter Perry, senior manager of Strategic Growth at Compass, renters shouldn’t just look at their monthly costs. “It’s important to take into account long-term financial benefits, such as building equity, large tax deductions, consistency of monthly payments and potentially huge appreciation,” he says.
Income is important but not as limiting as people may think. Just as there are high income earners who are “house poor” (spending more than 30% of their income on their mortgage), there are people with modest incomes who are able to live comfortably in their own home.
Also, renters must bear in mind that rent is almost always guaranteed to go up, while the payments on a fixed-rate mortgage will not, making ownership the more budget-friendly approach over the long term.
Most consumers are aware that following the housing crash of 2008, banks tightened their lending requirements. The perception is now you need 20% down to purchase a house. That means, bringing $50,000 to a closing on a $250,000 house — a seemingly insurmountable task for most renters.
However, what many are not aware of are the many programs that allow first-time buyers to close on a house with almost nothing down.
Buyers may have access to similar help through the VA, FHA and even USDA for rural Americans.
Once a renter has been pre-approved for a mortgage, they have a good idea of their target price range. Then, when they start looking at the entry-level inventory, they find themselves up against a competitive market.
An experienced agent will not only guide first-time buyers into areas where homes are more likely to be in their price range, but they can also help them find those rarer listings where a home that’s not necessarily move-in ready yet in a nicer neighborhood is selling for less.
Renters who have watched many real estate TV episodes may have unrealistic expectations about buying a property.
First, they may not be aware that every property has pros and cons. It’s important to remind them that finding an affordable home is going to involve some trade-offs, but ultimately, will offer the security and accomplishment of ownership.
Second, good houses go fast, so first-time buyers must be financially, mentally and emotionally ready to act.