Should I Rent or Buy a House?

With interest rates and monthly rents currently on the rise, you may be debating whether you should continue renting or invest in your first home. For some perspective, the average 30-year fixed mortgage rate is currently at 6.5%. On the other hand, rents have continued to climb in the Seattle area for six months straight. So, what’s the right answer?

To determine whether you’re ready for home ownership, you should first consider

the pros and cons of buying a house.

PROS

• You’ll have more space
  
  
• Freedom to customize your home
  
  
• Opportunity to build equity & long-term wealth
  
  
• Tax benefits (you may qualify for reductions in your federal or state taxes)
  
  
• Stability: mortgage payments do not fluctuate the way that rent prices do

CONS

• Maintenance costs
  
  
• Property taxes
  
  
• Most people must sell their current home before moving again
  
  
• Risk of decreasing value, depending on the economic strength and trajectory of the city that you’re purchasing in

Next, you should ask yourself the following 3 questions:

1. Are your finances in good shape?
   
   To qualify for a home loan, you’ll need to have a stable job and good credit score. For an FHA loan, you’ll need to have 3.5% saved up for a down payment. For a conventional loan, you should have at least 5% to 20% to put toward your home purchase. There are other costs to consider, as well, such as closing costs, homeowner’s insurance, property taxes, and maintenance.
   
   
2. Do you see yourself putting down roots in the area that you’re looking to buy a home?
   
   It’s good practice to plan on staying put for at least 3 years after purchasing a home so that you can build equity. Also, if you sell a home after living in it for less than two years, you could owe capital gains tax.
   
   
3. Are you ready to be a homeowner?
   
   What is your lifestyle like? If you’d prefer not to worry about home maintenance and want to put your extra pennies toward traveling, you’re better off renting. However, if you are looking to lay down roots and yearn for a space that you can customize to suit your needs, homeownership may be the right path for you.

All in all, only you can decide whether you’re ready to take the leap into homeownership. There is a lot to consider, and you should take the time to think it through. When the time is right, I’m happy to answer any questions that you may have about the home buying process.