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Most people rent when they are young and once they get their careers going, they buy a house. But is this the right move? Should you wait longer? Should you rent forever?

In this article I’m going to try my best to provide both side of the house buying debate and lay out all the facts in order to help you make your decision.

Let’s start with…

#1. Someone With Good Credit

In order to qualify for a mortgage, you need to have good credit. Unless you plan on buying it with the spare $200,000 you have laying around the house.

A lot of the time renters are stuck paying rent because their credit is shot, even though they really want to own a home.

So if you plan on buying a home in the future make sure you pay everything on time to keep your credit in good shape.

Even if you manage to secure a mortgage with bad credit, you can expect to have a big down payment and a high interest rate on your home loan.

#2. Someone Who Can Manage Their Debt

Also don’t even think about buying a home if you aren’tgood at managing debt.

Because when you are getting approved for a loan, creditors look at your debt to income ratio, they don’t want to lend to someone who already owes money to a lot of other people.

#3. Someone Who Has Enough Money Set Aside For House Maintenance

Whenever something goes wrong at your apartment you don’t need to worry about it because it’s your landlord’s job to fix it.

They also pay for lawn care services, home insurance, and property taxes, so make sure to factor all that into your budget.

#4. Someone Who Is Sure That This Is Really Where They Want To Live

A lot of people want to own a home and don’t think too hard about exactly where they are planting their roots, look into things like flood areas, school zoning, and how far emergency services are from your house.

Maybe you don’t want to live in one place for the rest of your life, well if you own a home and want to go somewhere else it’s going to be very hard, because you have money tied up in your home and if you wanted to rent it out then you’d have to do it from a distance which is very hard.

The main appeal of home ownership is that you have a place to call your own, and if you own your home (which means you paid for it completely, until then, it’s the bank’s) there’s pretty much no chance that you could end up out on the street.

But a home is not a good investment finance wise, although that mainly depends on where you live.

So if you buy a home in a location where the population is growing at a fast rate and housing prices keep going up, then you may be able to get a return on your investment, but anywhere else housing prices generally follow inflation.

And if you are putting a lot of money into something that doesn’t providee much of a return on investment then it’s considered a bad investment.

If rent costs are cheaper than your mortgage rate then you are probably going to be leaving a lot of money on the table because you could be investing the difference and getting a good return on it if you stuck to renting.

This plus house maintenance is the main opportunity cost of home ownership.

If you are renting, you can be more flexible in your life, nothing is stopping you from moving away, you’d just need to break the contract or wait for your lease to end and you could move to a whole other city.

Only you know what is truly best for you, life cannot be calculated with ones and zeros, only money can.

If you are at the point in your life where you want to settle down in one place to start a family and you want to have some stability, maybe buying a house really is the right choice but if you are fairly young and you don’t have many financial assets then you really need to think twice about tying up what little money you have into a depreciating asset.

Pros

  • Might build equity depending on your location and how it’s maintained
  • Stability
  • You can make improvements how ever you want to
  • No landlord to answer to

Cons

  • Big upfront costs
  • Generally a depreciating asset (especially when the housing market is in decline)
  • Some many more expenses besides mortgage, like maintenance, insurance, repairs, and remodeling

Pros

  • Small upfront costs
  • Freedom to pick up your life and leave
  • Not responsible for maintenance or repairs
  • Opportunity to build credit
  • No property tax
  • More cash to invest with

Cons

  • Landlord can raise rent or sell the property
  • Doesn’t build equity
  • Might have to move a few times

Hope this makes the choice a little clearer, because common thought doesn’t see the hidden value in renting and believes it’s throwing your money away, but if you do it right, you are actually getting more money renting than you would owning a home.

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