The decision to buy your first home can be a tough one. It can be a big commitment. You won’t be able to pick up and move as easily as you might have when you were just a renter. A big part of your financial resources will be directed not just toward the purchase of your home but for upkeep. On the other hand, there can be many financial advantages to owning your home.
Assess Your Financial Obligations
This is the first step in determining what you can afford to buy. In addition to saving for a down payment, you might also be saving for retirement or for your child’s college education. Keep in mind that you do not have to put away enough to pay for all four years of tuition. There’s the option to take out a mix of student loans from the government and from private lenders to finance your education. Furthermore, while saving for retirement is important, your home can also be a significant investment in your future.
Look at Your Future Plans
If you aren’t sure whether you’re going to stay in your current area beyond a year or two, you might be better off renting. However, if you know you’re going to be there for longer, even if you ultimately plan to end up somewhere else, buying a home may make more sense. In some areas, monthly mortgage payments can be significantly lower than rent. It’s important to understand that you can’t directly compare the two because owning a home comes with additional expenses, including insurance and taxes, but you may end up spending less money in the long run with your home. You’ll also have a tangible investment, which is not the case if you remain a renter.
The Housing Market
If you live in hot housing market, you might feel as though you have to act now or buying a home will always be out of reach. If you genuinely want to purchase a home at this time, then you should consider doing so, but you shouldn’t let concerns about rising costs drive you to make a purchase you otherwise wouldn’t. Real estate bubbles don’t last forever, and in some cases, it may be better to wait for a market to cool down.
The Psychological Effect
Sometimes, whether or not the numbers add up in terms of renting versus buying, you simply want to live in a place that you own. This may be particularly true in a tight rental market, where you might always feel as though your living situation is precarious. When you own your home, you’re not subject to a landlord’s whims, and you can do whatever you want with the property. If you hate the color of the walls in your bedroom or the fixtures in the kitchen, you can tear them out and replace them. There’s a psychological benefit that can come from being a homeowner that overrides any practical pros or cons. As is sometimes the case with other big decisions in life, sometimes you simply know that the time is right.