So, as a renter, each year when you get ready to renew your lease do you shutter to see the increase that your landlord comes up with? Well, you’re not alone. Lots of renters out there are feeling the pinch as rents continue to rise according to a new report out by the U.S. Census Bureau. If you’ve ever thought you’d like to be a homeowner sometime in the future you may find yourself wondering at what point, here in our area, does it make sense to buy and potentially pay the same amount each month as renting?
The report I mentioned above shows that over the last ten years homeownership rates have been going down, even as rents continue to climb. For example, the median rent (for the U.S.) in 2016 was $864 per month, $850 in 2015, and $766 in 2014. Certainly not insignificant increases when viewed on an annual basis! Also, homeownership rates are 5% below what they were just 10 years ago and the long term trend shows a continued drop.
So, if you have been feeling the pinch of rising rents and you’re ready to take control of your housing situation, it could be the right time to consider upgrading to homeownership. So, how do you know if you are ready and what are the next steps?
Consider your long-term goals – In general, if you are planning to stay in your home for at least five years, it probably makes sense to buy. However, this rule of thumb varies based on where you’re renting and considering buying. You can consult nifty online rent vs. buy calculators online to plug in your specific details and see how the numbers work out. Also, give me a call, I’m always available to discuss some scenarios and options for your specific situation and work through the numbers with you.
Know how much you can afford – Once you’ve decided you’re ready to explore homeownership, you’ll need to figure out how much you can afford as a monthly mortgage payment which will then help us calculate how much house you’ll be able to afford. The rule of thumb is that your housing payment (remember to include property taxes and homeowners insurance) should not be more than 25-30 percent of your take home pay. “That’s not much, I can afford more,” you say? Well, as a homeowner, remember you’ll need to have funds available for maintenance, repairs, and any special projects or unexpected home expenses that undoubtedly will happen. Planning ahead will keep your American dream from becoming a financial nightmare.
Start preparing – Buying a home is an exciting process that will be easier and more fun if you are prepared. You’ll need to save up a down payment. Having enough saved to put down 20% of the purchase price is ideal and will save you money by not having to buy mortgage insurance. However, there are also many low down payment and payment assistance options that we can explore. You’ll also need to make sure your credit is in good shape and we can get you prequalified, before you begin shopping. All items that I can help walk through with you.
Owning a home can be a rewarding and smart move for you and your family, if you are ready. One of my favorite parts of my work is that I get to help first-timers buy their first homes. If I can help you, it would be a great pleasure! Give me a call or email me today and I’d be happy to help!