4 Questions to Ask Before Buying
A lot of renters are eager to buy their first homes, but don’t want to make the same mistakes that so many first-time buyers made prior to the housing crisis. Indeed, deciding whether or not you could benefit from trading in your monthly rent for mortgage loan payments is a difficult decision to make. This is why the American Bankers Association (ABA) has come up with the following questions that every consumer should ask themselves when determining whether they should be renting or buying:
- How Much Do You Have in Savings? Ideally, you should have between three and six months of living expenses stored away for an emergency. Calculate what your emergency funds should be, and then calculate what you can afford in the way of a down payment on a home or a deposit on a rental property.
- How Much Will You Pay Every Month? Add together all of your financial obligations and calculate your monthly payments, then make a hypothetical budget for the home you wish to rent or buy. What do utilities cost in the area? Do you have to pay for trash pickup? What about renter’s insurance? You’re going to want to make sure that you can reasonably take on your monthly rent or mortgage loan payments.
- What is Your Credit Score? Whether you’re renting or buying, you’re probably going to have someone look at your credit score. The lower this score is, the less eligible you will be for desirable homes or rental properties. If you have a low score, you may want to put off your move in favor of bringing your score up a few points.
- How Long Do You Plan to Stay in the Home? Buying is generally only a good decision if you plan to live in the same place for an extended period of time. This allows you to build equity and avoid the extra grief and expenses that come with selling your home. If you think you may wish to move in the near future, you may prefer the flexibility and lower maintenance costs of renting.
