You are searching for your next home on the rental market because of any number of reasons: you’ve always rented, own a home elsewhere, worried about your credit, etc. Sometimes, renting really is the best option for your family because you know you will only be in that location for a very short amount of time or you want to get to know the area better before buying a home. Both of the scenarios make sense, but if the purpose of renting falls in any of the former scenarios then you should seriously consider the pros and cons of renting vs buying. We will break down each of these scenarios to help you determine if renting really is the best choice for you.
You’ve always rented…. the thought of buying or being a homeowner may seem overwhelming but keep in mind, you are paying someone else’s mortgage when you rent a home. At the end of the lease term, you are exactly where you started and a few thousand dollars invested that you won’t see any kind of return on. The money you’ve spent on rent is gone. Maybe your concern is the cost of maintaining the home will be to expensive. This is where the 1% rule of thumb comes into play. The 1% rule says that you take the purchase price of your home and multiply by 1% and that’s how much you should set aside per year for home maintenance. Let’s say you bought a home for $150,000, multiply this by 1% and the total is $1500. You won’t necessarily spend $1500 each year but over the span of 10 years it could average out to about $1500 per year. Let’s break it down a little further, $1500/ 12 months=$125/month. That doesn’t sound quite as daunting. As for buying a home, that’s where having a knowledgeable real estate agent comes in handy. Their job, often at no cost to you (seller typically pays commission in a lot of markets) is to walk you through the process from helping you narrow down your search, to writing the offer, negotiations and all the way through closing. Having a real estate agent on your side can help you navigate through uncharted waters.
You own a home elsewhere…. maybe you chose to be landlord for investment purposes, you plan to move back into your home someday, or you tried selling it but the market just wasn’t in your favor. First and foremost, speak to a CPA to find out what tax breaks you may be eligible for and any expenses you may be able to write off on your next tax return. Also, keep in mind that no two markets are alike. There are so many variables that come in to play here that would be an entire article all on its own. BUT, just because you own a home elsewhere doesn’t necessarily mean that you cannot buy another home in your new location. If you didn’t choose to be a landlord the thought of buying another home and potentially being a landlord, a second time can scare a lot of people. This is where having a knowledgeable mortgage lender is very helpful and can discuss what your options are in regards to purchasing another home. It never hurts to ask questions and you might be pleasantly surprised at the answers. Besides, why rent when you can own and potentially recoup the money you’ve put towards YOUR mortgage when you sell someday instead of paying someone else’s mortgage when you rent and getting nothing in return when it’s time to leave.
You are worried about your credit… again, this is where a knowledgeable mortgage lender can be your best friend if you are ready to own your next home. Some mortgage companies have programs for people whose credit is lower than what is required to purchase their next home. In these programs they have specialists who work with you to get your score up to where it needs to be in order to move forward. Sometimes it can be relatively quick, as in a month or two, and sometimes it can take longer but the good news is that even if its going to take 6 months or more, you are on your way to owning your next home.
You can’t go wrong just reaching out to a real estate agent and a mortgage lender and just start asking questions. Let them know what your current situation is and discuss your options. AND, more importantly, asking questions doesn’t cost you a thing.