Buying a home is one of the most important financial decisions you will make. Many people choose to continue renting until they are ready for such a responsibility. Unfortunately, our area and most of the country are struggling to provide adequate and affordable housing options for people that are looking to rent. From 2000 to 2014, the cost of rent in the United States has grown twice as quickly as household income. This means Americans are contributing 30% of their income, on average, toward their housing expenses. That is 5% more than recommended.
The idea of purchasing a home seems like a daunting and expensive task. After weighing initial costs, recurring costs, real estate fees, etc. most people choose to continue renting because “it’s easier that way.” Renters are not paying for home maintenance, property taxes or home insurance; that burden belongs to the landlord. Why would anyone choose to own a home when these costs can add up?
It may surprise you to find out that owning a home is actually less expensive in the long run than renting a residence.
While there are the recurring costs mentioned above, there are several things on your side when you become a homeowner. Inflation is your friend – you no longer need to worry about your landlord raising the price of your rent as housing prices increase. Your monthly costs essentially stay the same while you live in that home. Eventually, as the home’s value increases and your mortgage principal goes down, you are saving more money than a renter. In fact, a recent statistic was posted on Trulia.com that says if you bought a home today and lived there for seven years, you would save 38% compared to renting. Also, we can’t forget to mention the tax breaks homeowners qualify for, which is money right back in your pocket.
A home is also a reflection of who you are and your taste. When you rent a home, you aren’t getting anything in return for the effort you invest in creating a living space. Homeowners can invest home improvements and ultimately call the shots on how you choose to live. In the meantime, you are also establishing credit and equity.
That being said, you have to be financially secure before you even consider looking for a home. What does that mean exactly? You are debt-free, have an emergency fund of about 3-6 months living expenses saved, and ideally enough money saved to afford a 15% down payment on a home.
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