An Honest Home Mortgage Question: Should I Rent or Buy?

Home ownership is different for everyone. Many people don't ever buy property, preferring the freedom of choice and mobility and no responsibility for upkeep. Other individuals thrive on owning property. They enjoy the upkeep and responsibility and see real estate as one of the most secure and high-yield investments available. Like any investment, real estate entails some risk. However, as with other types of investments, you can research the ground rules, evaluate your own wants and preferences, and make an informed decision.

If you're trying to decide whether or not to buy a house, consider the following questions:

Can you afford the monthly payment? A mortgage payment will probably be higher than a rent payment. You'll need to determine if you can pay the additional money per month, and, in addition, if you can afford the monthly or annual costs of insurance, property taxes, and general maintenance. Furthermore, you should be sure that you'll be able to continue to make that payment for years to come -- that your job and anticipated salary will continue to support the payment.

How long do you plan to live in the area? The rule of thumb is that you shouldn't buy a house if you don't plan to own it for at least three to five years. Buying, selling, and mortgaging a house can incur significant fees, and three to five years is typically a break-even point for recouping those fees. If you plan to make a major move in the next few years, buying now may not be in your best interest.

Can you qualify for a home mortgage? You may need to make some amount of down payment when purchasing a house, so you'll need to figure out how much cash you have on hand or available from other investments. You'll also need to think about your credit history and income in order to secure a mortgage. Mortgage lenders, like Mortgage Loans Online, will usually want to see income documentation for the last two years to determine a consistent level of income. We will also examine your resources, for the down payment, and your credit history, for your record of credit and credit repayment.

Do you plan any major life changes (e.g., radical employment changes, marriage, children) in the very near future? Be sure to consider any other impending life changes in your calculations of resource needs or future ability to pay. You may be planning to have children soon; if so, you may need to budget for additional costs that may come up. You may be planning to change careers or return to school, either of which could mean a change in your financial status.

How are interest rates and the housing market? Though you can't control area home values and rates, you can look at trends and past industry behavior. Are rates at or near an all-time low? A relative high? Are home prices increasing or decreasing? To some extent, you will have to make a guess as to how these numbers will behave in the future, but examining trends will help you educate yourself in order to make a more informed decision.

Will it give me any tax savings to own a home? Depending upon your income, tax bracket, property value, and amount of interest payments, owning a home could be a huge tax advantage.

One advantage to purchasing a house and securing a mortgage is that someday you may not have to make a monthly payment for a place to live. Real estate also can be a tremendous investment vehicle, especially if property values increase at a higher rate than your mortgage interest. However, home ownership may not be for everyone. You may be in a situation where your rent is so low that it just doesn't make any financial sense for you to buy a house. That's fine. Ultimately the decision to buy a house has to make sense for you, on both a personal and financial level.