If you're
unsure whether you're ready to buy, first consider your outlook.
Conventional wisdom says that homeowners who are likely to be in a home for at
least seven years will see prices rise. If you're going to want to (or
have to) sell the home in the next three years -- when some markets may still be
suffering the mortgage mess fallout -- consider renting.
It's true,
renting has its own costs. But you won't pay closing costs, real-estate
agent fees and myriad other expenses incurred when buying, owning and selling a
home. Renting also may allow you to save for a larger down payment,
potentially eliminating the need to pay for private mortgage insurance when
you're ready to buy.
If the only
way to afford the home you want is to finance it with an adjustable-rate
mortgage, I'd be wary of buying now. Some readers over the years have
taken me to task for being overly conservative by recommending fixed-rate
mortgages. ARMs worked for many during the housing boom, when home-price
appreciation built enough equity to allow homeowners to refinance. Amid
the bust, many ARM holders are finding they can't refinance because they're
underwater with their mortgages. Sadly, many are losing their homes in
foreclosure because they used ARMs to buy homes they really couldn't afford.
If your
finances are solid and you can afford the home you want with a conventional
mortgage -- and you're buying for long haul -- the time may be right. And
for some buyers, the market is secondary to the reality of family life -- the
impending arrival of a new baby may be the deciding factor to whether now is the
"right time" to buy.
Excerpt from "Is Now a Good Time to Buy a House" written by Terri Cullen.
Wall Street Journal, September 11, 2007
Should
you sign another lease or take the plunge and buy a place of your own? Millions
of Americans ask themselves that question everyday. To make a wise decision
consumers should consider a few factors, such as their lifestyle and financial
situation. There is no right or wrong answer when trying to make a decision to
rent or buy. A good decision is one that is right for you. However, there are
advantages and disadvantages to both.
Although most Americans own their homes, homeownership is not for everyone. If
you move around frequently, have credit problems or if you cannot afford the
home you want or simply do not want the responsibility of owning a home, you
could be better off renting. Usually when renting, the landlord or owner of the
property generally pays for the cost of any work or repairs that are done to the
property. And, there is generally less up-front cash needed to move in.
However, when you are renting a property, you are waving good-bye to your money
each month. Renting a home does not provide tax advantages to the renter. Any
and all tax advantages go to the landlord or property owner. Also, monthly
payments for renters can be unpredictable, depending on the lease.
Owning a home is a big responsibility. Not only does it mean paying a mortgage
each month, but it also involves other costs associated with the home, such as,
the cost of insurance, taxes, repairs and general maintenance. First-time
homebuyers are often startled by the investment associated with purchasing a
house. The down payment required can be as much as 20 percent. You also have to
consider other fees, such as lawyer's fees, points, escrow costs, appraisals,
and credit checks.
In
spite of the risks and responsibilities, millions of people enjoy the rewards of
home ownership. Purchasing a home is generally a sound investment. As you pay
down your home loan, you are building equity. And unlike many things you buy, a
home can actually increase in value over time.
Home
ownership does offer tax advantages. The mortgage interest and real estate taxes
are tax deductible, which allows you to subtract part of your housing-related
expenses from your income, thereby reducing your tax liability.
There is not much doubt that for most people owning a home is better over the
long term than renting. When you have made the decision to buy, do your
homework. Know how large a mortgage you can afford. If possible, get
"pre-qualified" for a loan. When you find a home you like, carefully give it
your own personal inspection. If you have questions, seek the advice of a
professional. And, contact the Better Business Bureau for a reliability report
on the mortgage company that you decide to do business with.
By the Council of Better Business Bureaus, Inc., April 18, 2003.
