Buying Vs. Renting a Home: What to Consider

Buying Vs. Renting a Home: What to Consider

Choosing whether you are going to rent or purchase your
next home is a life changing decision. Not only will this decision affect your
lifestyle, but it will
likely also affect your overall finances. Owning a home may be a lifelong goal,
but renting does have its advantages, especially in today’s
economy and housing
market. There are many factors that go into making this decision for yourself
and your family. Continue reading to learn more about how deciding whether
renting or
a home
will be right for you.


Crunch All of the Numbers

Your Budget

The first and most important step in deciding whether or not you are
going to purchase a home, is determining whether or not you can
it. If you have not done so already, you’ll want to create a budget
outlining all of  your current expenses.
Additionally, you may want to consider reviewing your emergency fund to ensure
that the possible increase in
will be covered. If it would not be covered, we would recommend saving
for three to six months’ worth of an emergency fund including the potential
increased expense, before
moving forward.


Credit Score and
Debt-to-Income Ratio

Once your budget is set and your emergency fund is saved, you will
want to start reviewing things like your credit score and debt-to-income ratio.
It should come as no surprise that the higher your credit score is, the better
off you’ll be when it comes to getting approved for
. The higher your score, the lower your interest rate can be. If you
have a low credit score, it is a good idea to hold off on a purchase until you
are able to raise it, as it may be harder to get approved for a loan and your
interest rate may make monthly payments unattainable. Your debt-to-income ratio
(DTI) is another factor that lenders will be looking at. This number is the
percentage of your gross monthly income (before taxes) that goes to debt
payments. These types of payments can include anything from
card debt
, to auto loans, and even insurance premiums.
According to, a good debt to
credit ratio is anything that sits under 38%, although they recommend that you
get it as low as possible. 


Your Down Payment
and Closing Costs

For many years, it was expected that you pay at least 20% of the
purchase price of the home as a
These days, it is possible to pay as little as 3% of the purchase
price, depending on the type of loan you apply for. The trade off to paying
less down is  that you will be taking on

. Along with saving for your down payment, it’s important to know that
there will likely be closing costs to pay that are not a part of your down
payment. Depending on the type loan you apply for and the contract between you
and the seller, you may not need to pay these costs upfront. You will want to
discuss this with your potential lender early on so that there are no
surprises. Studies show that on average,
tend to run between 2% and 5% of the purchase price.


After you have reviewed your budget, have a good standing credit and
DTI, as well as the requisite amount of
cash saved, you may
be in a good position to start considering a home purchase. That being said,
there are other factors to consider before moving forward.


Consider Future
Wants and Goals

The decision whether to rent
or purchase a home should not be taken lightly. A few questions  you’ll want to ask yourself might include :
“Where do I see myself in the next five years?” “What are my long-term
goals?”  The answers to these questions
can help align your choice.


You would always have the option to sell a home if needed, or to buy
out of your current lease, however if you can avoid spending time, money, and
stress on a choice that you aren’t sure about, it makes sense to do so. If you
know that you plan on being in a specific location for five years or more,
purchasing a home may be the best option for you. If you are someone who likes
to be spontaneous or live a more nomadic lifestyle,
may be a safer bet.


Weigh the Pros
and Cons 

There is no “one size fits all” option when it comes to choosing your
home. The right
choice for you is going to depend on your budget, the current housing market,
the size of the space you are looking for, the location and more.


Additional items to consider when weighing the pros and cons of your
potential new home may be; the proximity to friends,

, grocery stores, school districts, as well as any additional living
costs associated with either choice. Are you not very handy? Renting would
leave many areas of maintenance to your landlord., and likely out of your
pockets. Prefer to build equity if possible and don’t mind general upkeep?
Buying a home might be more for you.


When it comes to renting or buying a home, the choice may not be
immediately clear. Be sure to keep a level head throughout the process and
avoid being easily persuaded either way. The choice needs to make sense for you
in the long run. Whether you’ve decided to rent your next
or purchase, something you can’t afford to go without is insurance.
For more information about
insurance policy
 with NYCM,
check out the link below to contact one of our