Up until the economic crisis that hit the United States in 2007 and 2008, many people chose to purchase a home instead of renting to gain equity and have some cushioning later down the road.  With the economy still not completely back to where it was prospective and current homeowners are paying closer attention to the costs and benefits of owning a home and if renting is a better option for them.

When considering if renting or purchasing is the best route for you to take, it’s important to take into account the following to help you make your decision:

Renting

• Building Credit  By paying rent on time each month it can help build your credit score which can be beneficial for if you’re looking to purchase a car or eventually buy a home.
• No Maintenance Expenses If anything goes wrong with plumbing, electric, water, etc. your landlord is responsible for taking care of it.
• Flexibility  Sometimes you move to an area and aren’t sure of the neighborhood that’s right for you.  Renting allows you to “try out” an area short term (six months to a year) to help you decide the place that’s best for you.
• Career or Income Uncertainty. If you’re unsure where you’ll be living due to your job or if you’re expecting a pay increase or decrease through work, renting might be the best option for you. Buying a home ties you down to one particular area and an income change can affect your ability to pay your mortgage.
• Utilities  Some landlords offer included utilities. These can include, electric, water, heat, gas and garbage which can save you some money in the long run.
• Rent Control  At the end of your lease a landlord has the option of raising rent for your next lease term.  There are some rent controlled properties but if you aren’t living in one of those, budgeting might need altering in the long term.

Buying

• Equity  If you intend to stay in your property for at least five years, the amount you purchase your home for will likely be offset by the equity you gain and an increase in your home’s value. When the economy is good, interest rates can sometimes drop, which is a perfect time to refinance your mortgage to get a better rate or you can borrow against the equity in your home to fund major purchases once your home is paid off.
• Creative Control When you own a home, you have complete control of what the interior of your home looks like.  If you’re sick of the color of your countertop in the kitchen or want to paint each room a different color, you have complete control!
• Maintenance  When you own a home are responsible for maintaining the exterior of your home.  If your condo or home is part of a homeowners’ association, your monthly fee sometimes covers exterior maintenance work and is taken care of by them.
• Tax deductions  When filing your taxes, mortgage interest and property taxes are deductions you can make.  If you purchase energy star compliant appliances or you work from home, you may be eligible to take additional deductions for the appliances, your home office and portions of utilities.

How much money do I need to purchase a home and can I afford a home?

The amount of money needed to purchase a home depends on its cost, the type of loan you get and the amount of your down payment. When you make your offer on a home and it’s accepted by the seller, you will need to write a check to accompany the offer to buy the home. You will also need to pay for a home inspection and any costs needed for credit reports and an appraisal.

The next step in the equation is your down payment, which is the amount required by the lending institution to secure your loan. The lending institution will determine your down payment or if one is needed by your credit score, debt-to-income ratio and available cash. A down payment is separate from earnest money, so keep that in mind as well.

There are sometimes programs that lenders or the government offer called first time home buyers credit which allows you to receive down payment assistance and closing cost funding from the county you are buying in. You might also qualify for below market value fixed interest rate loans.

Closing costs are in addition to your financed amount and can add 3-5% on top of the price of the home. Even if you qualify for Veterans Affairs loans or “100 percent financing,” loans, closing costs are still additional costs that can’t be wrapped in the loan.

Closing costs can sometimes be negotiated in the home purchase price. Some sellers will consider paying a buyer’s closing costs out of their profits. Buyers should speak with their real estate agent if this is something that can be discussed with the seller.