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How to Stop Renting and Buy Your First Home

How to

Should you rent or buy a home?

 

There are plenty of online resources that help break down the pros and cons of owning a home. More Americans are renters now than at any time in the last 50 years. With these changing statistics, many people are asking: do I want to buy a home? If so, how do I make it happen?

Buying a home is a huge decision that shouldn’t be taken lightly. Although there are numerous steps in the homebuying process, the biggest one is figuring out your finances. Of course, there are lifestyle considerations, such as career goals, school districts, and willingness to stay in one area that determine whether you should rent or buy.

This guide is designed to help anyone trying to decide whether they should continue renting or buy a home. If you‘re ready to start the homebuying process after reading this guide, check out our first-time homebuyer resources or talk to a Chase Home Lending Advisor!

How to decide if you're ready: lifestyle considerations of buying versus renting

Let's start by discussing the pros and cons of renting vs. buying from a lifestyle perspective. Keep in mind, buying a house isn't for everyone. Ask yourself:

  1. What is my current lifestyle? Am I ready for a long-term investment?
  2. Where do I want to settle down? Can I afford a house near my work? Is the neighborhood I want to live in in a good school district?
  3. Do I want a house? Condo? Townhome?
  4. What is the job market like in the city I want to live in?
  5. What is the general cost of living in this city?
  6. Do I have the money or ability to take on a fixer upper? Do I want a new home?

Your lifestyle plays a major part in your readiness to buy a home. These six questions are by no means a comprehensive list of things to consider when deciding to buy a home. However, if your answers indicate that you need more flexibility, and that you need more time to make a decision, it may be best to continue renting in a location you find desirable. That way, you can determine the neighborhood, costs, and lifestyle advantages of the area you’re considering buying in.

Of course, if you feel you're prepared to buy, great!

How to decide if you’re ready: financial considerations of buying versus renting

The first stage in the homebuying process is understanding your finances and determining whether renting or buying is best for you.

Financial considerations before applying for a mortgage

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  • What is my credit score?
  • Is my job stable? How does a consistent monthly payment factor into my monthly budget?
  • How much debt do I have? Am I willing to take on more?
  • How much can I afford every month?
  • Will I be able to save money once I have a mortgage?
  • What is the difference between the rent I am paying now and a mortgage I can afford?

 

Financial considerations after being approved (and throughout the purchase phase)

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  • What additional costs do I need to be aware of such as applications, inspections, agent fees and closing costs?
  • How much should I put down?
  • What are my monthly mortgage costs?

 

Financial considerations after purchasing

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There are other costs to keep in mind beyond your down payment and monthly mortgage payment.

When renting, repairs and maintenance issues are handled by your landlord or property management company. Other fees, such as property taxes, trash pickup and water bills are often included in your rent.

 

As a home owner, you'll be responsible for expenses like:

 

  1. Property Taxes
  2. Insurance
  3. Repairs and maintenance
  4. Additions
  5. Safety – alarms, lights, additional features

While many home repairs aren’t too costly, some repairs, like replacing a roof or repairing a water leak, can be expensive.

 

Additionally, you need to consider the difference in cost between homeowners and renters insurance. Homeowners insurance may cost several hundred dollars per month, while renters insurance is often more affordable.

How to determine the pros and cons of homeownership

Buying pros:
  • As you pay down your mortgage, you may build equity in your home. In time, you may be able to use your home equity to take out a line of credit for home improvements, pay down debt or put toward other financial goals.
  • When you own your home, you can turn it into your ideal living space. Unlike renting, you have the freedom to renovate, remodel and even expand.
  • Once you become a homeowner, there may be tax benefits associated with home ownership, such as deducting mortgage interest or local property taxes. You may want to speak with your personal tax advisor with questions or for more details on those benefits.
Buying cons:
  • Large financial investment, both in the beginning and in the long-term
  • Expenses such as repairs property tax increases, etc.)
  • Inability to easily move in a major life change scenario, such as moving for a new job
Renting pros:
  • Smaller financial investment in upfront costs and maintenance/repairs
  • Ability to move more easily when life changes
Renting cons:
  • Moving, especially if rent is raised or the property is sold
  • Not able to build equity
  • No tax benefits

 

Things to help improve your buying power

  1. Improve your credit score
  2. Pay off debt

Other considerations

Buying a home is a long-term commitment with many mortgage terms lasting 30 years.

When renting, you are locked into a monthly payment for the term of your lease. Once your lease expires, your landlord can raise your monthly rent.

Considering your needs

Deciding if you want to continue renting or if you’re ready to buy a home depends on your needs and current financial state. If your career requires you to relocate often, or you are just beginning to save money, then owning a home may not be the best move right now.

However, if your career has stabilized and you have the financial means to buy a home, considering one of our purchase products may be the next step in your home buying journey.

Interested in learning more?

Check out our First-Time Homeowner Guide or contact us today! If you are ready to start the process, our mortgage prequalification request is the perfect place to start.