|
Is owning a home always the best?
I am contacted a few times every week by a consumer that has been told "you have to own a home, it is the best thing to do in your situation" as a blanket statement. There is a negative stigma attached to renting and many people within their circle of friends feel pressure to own a home......as if renting is just one small step ahead of living with your parents.
Relocating to a NEW Area
Often times renting is actually the very best thing you could do. Many folks who are relocating because of a job or family use the internet (a great tool) to search local areas/schools and come up with an area they would like to live in. They rely on a Mortgage Broker or Realtor's "local expertise" and then buy a place with just a weekend visit OR even worse sight unseen.
The problem with this is that the brain decides to see what it wants to see. When you go to a new area for a visit, your focus may be on the beauty, friendliness, or landscape. There is a "fog" over many of the details of the area and your mind doesn't get a chance to focus on the "little stuff". After moving to an area many people realize that a favorite shopping area is across town, or a school they really like is just over district lines. Maybe there is a recreation league for youth that is in a neighboring area and they didn't realize it until 3-4 months after they moved to the area.
I deal with a good number of Active Duty Military in my job and I advise many of them to RENT in their new area (or take advantage of base housing) and then start the search for a home to buy after 4-6 months. Many of those that have come back have commented that they were glad they waited because they had found an area of the county they lived in that they didn't see before.
Working on your Credit to improve your rate
Many people are convinced that they have to "Buy now because rates are going higher!" yet their current credit situation has them paying higher rates as it is. A 3-6 month mini plan on paying debt down, deleting incorrect or duplicate negative information on their reports, and paying down balances on their account can raise their credit scores 20,30, even 100 points in a short amount of time. This action will often times result in not only a lower interest rate on their mortgage, but lower rates on their consumer accounts, lower insurance rates, and possibly the ability to afford more house for the same monthly payment.
This sounds like a great plan but I cannot tel you how many times I have sat with a client and explained this, got the borrower on board to wait and do things right, and then the very first open house they drive by that weekend they put an offer on the home and ask me to some how give them what they were going to get in 6 months (after the work on their credit) ....TODAY!
Some of these borrowers will purchase the home at the higher rate and unfortunately foreclose within the year or damage their credit by making late payments on a home they were not ready to buy. The trickle affect is not being able to get favorable rates on an auto loan when their car breaks down or having to charge something on a high rate credit card.....and the spiral affect continues.
Sometimes it is just cheaper!
Believe it or not sometimes it is just plain less expensive to rent then own a home. I had a client in Florida that owned 6 homes that he rented out across the country yet he rented his own home. He was living in a 375k home and was paying 1200 a month for rent......and obviously enjoying the savings each month with not having to pay a mortgage, taxes and insurance, and maintenance on the home. "Are those deals really out there?" some ask and the answer is YES there are! Remember that home values have risen dramatically of late but many of these homes were purchased maybe 10-15 years ago when values were much lower.
It is important when looking for a home in an area to get with a mortgage professional (either at your local bank or credit union or a local mortgage broker) and find out what you would be paying for a home in your price range each month. Then look at the local rental market and see what a comparable home is renting for. If you are say 300 dollars a month less to rent a home, after factoring in closing costs to buy the home it would be good to ask yourself what you could accumulate in wealth if you saved that 300 a month in a Roth IRA or a 529 college fund. Remember that while many in the recent past felt that acquiring wealth was as easy as buying and selling a home, there are some old fashion ways of creating wealth as well.
Making Smart decisions
In closing just remember that those "rates that wont be here long" of 3 years ago are still here. The "Home prices that will continue to sky rocket" are beginning to adjust themselves and most of the "skyrocketing" across the country has come to a dead stop. In the end making sure that you are as financially and credit sound as possible before making the plunge in combination with making smart decisions (as opposed to emotion driven decisions) will allow you to make the very best decision on whether to buy or rent your home.
|
