Choosing Between Renting and Buying
Most millennial buyers are getting to that age where they are ready to buy, but many are stuck in the predicament of trying to choose whether they should rent and hold out for just a bit longer, or buy into a new home and hope for the best. There are some encouraging trends, especially in fledgling communities, that might tempt millennial buyers into securing a home for themselves. Here are some questions and thoughts to consider before you make that final choice between buying and renting.
Can You Afford the Downpayment?
One of the first questions any potential home buyer has to answer is whether it’s possible to afford the down payment. FHA stipulates a loan requires no more than about 4% down, but that changes depending on whether you use FHA. Lenders may require up to 20% down on a home, which can be a substantial charge on pricier homes. If you can afford the down payment, will it run you broke? Odds are good whatever house you choose will need some work done to it during those early years to get it to a point where you consider it livable.
These concerns are largely handled during rental situations, and the deposit is significantly lower too.
If you want to reside in a city like New York or Los Angeles, would you get more by buying or renting? Both of these cities are going to require you having a substantial income before you ever consider buying, but location is crucial in a place like Los Angeles where transit is not as well developed. In New York, the consideration is space. So which is best? The answer depends on your budget, and the kind of lifestyle you want long term. Odds are good you’ll find work in these cities, and well paying work at that. It’s probably not a good idea to buy outright hoping for the best, so rentals are a great option for millennial buyers looking to relocate.
Owning is basically one of the first investments most people make in their lifetimes, so make it count. Buy in an area that shows developmental promise, has good schools, low crime rates and a vibrant culture. Until you find these qualities in a property you can afford, and afford to save after you’ve purchased it, it’s best to continue renting. Don’t let rate hikes scare you into making a decision that could burden you for the next 30 years, but this is a great time to buy if you can afford to do so.
Kuba Jewgieniew is the CEO of Realty ONE Group, one of America’s fastest growing companies according to Inc. Magazine.