It’s no secret that buying a home is one of the biggest financial decisions you’ll make, but one that you likely won’t regret. In fact, according to Bank of America’s Homebuyer Insights, Americans prefer a mortgage payment to paying rent monthly. The insights found that the majority of people who have bought a home are happier because of it, and 83 percent say they wouldn’t go back to renting. But how do you know when you’re ready to graduate from renter to homeowner?
Owning a home is a financial commitment that requires planning and reflection on where your life is headed. Before deciding whether to continue renting or to buy your first home, it’s important to understand each option’s advantages and drawbacks, keeping in mind what’s best for you depends on your personal and financial circumstances.
- Consider Upfront Costs: Renting often means coming up with your first and last month’s rent, as well as a security deposit, while the upfront costs of buying a home can sometimes be sizable. Keep in mind, though, that there are solutions that can significantly reduce the amount of money you need to buy a home, like low down payment mortgages and grants to help you cover much of your down payment and closing costs.
- Balance Self-Expression and Responsibility: Renting often limits the freedom you have to make the space your own because you must follow the rules designated by your landlord. However, your landlord is financially responsible for fixing things like leaky faucets or even replacing appliances that no longer work. On the other hand, as a homeowner, you have the freedom to customize or update your home (some of which may boost your home’s value) to make your home fit your lifestyle and needs. While all repairs and maintenance are your responsibility when owning a single-family home, there may be exceptions for condos and co-ops with a Home Owner Association (HOA).
- Build Long-Term Wealth: As a renter, your landlord dictates your monthly rent amount, which means it could increase for a variety of reasons. On the other hand, homeownership has historically helped families create a legacy and build long-term wealth. As a homeowner, you learn savings discipline, enjoy tax benefits, build equity through your monthly payments, and are protected from rising rental rates. This, combined with a home that is likely to appreciate over time, often leads to increased wealth for homeowners.
- Take Into Account Future Plans: Renting offers more flexibility, perhaps to relocate for a career opportunity. While owning a home is typically a long-term commitment, low mortgage interest rates and low payments mean some owners can break even on a home purchase (compared to the rent they would pay in the same period) in just a few years.
- Consider Your Larger Financial Plan: Would you need to adjust your monthly budget to buy a home? Would it mean stretching to your financial limits? Would owning allow you to maintain your other savings goals, and would you be able to maintain savings in case of potential home emergencies, such as needing a new roof or heating/cooling system?
If you’re still unsure which is the right option for you, connect with a local lending specialist to discuss your situation and available options. You can also check out online resources, such as Bank of America’s First-Time Homebuyer Online Edu-Series, to help you answer one of life’s toughest questions: to buy or not to buy?
[Editor’s note: This article is sponsored by Bank of America.]
1 Qualified borrowers must meet eligibility requirements including, but not limited to, being owner occupants, meeting certain qualifying income limitations and purchasing a home within a certain geographical area. Minimum combined loan-to-value must be greater than or equal to 80%. The America’s Home Grant Program is a lender credit. Program funds can only be used for nonrecurring closing costs including title insurance, recording fees, and in certain situations, discount points may be used to lower the interest rate. The grant cannot be applied toward down payment, prepaid items or recurring costs, such as property taxes and insurance. Borrowers cannot receive program funds as cash back. Maximum income and loan amount limits apply. The home loan must fund with Bank of America. Bank of America may change or discontinue the America’s Home Grant Program or any portion of it without notice. Not available with all loan products, please ask for details.
2 Qualified borrowers must meet eligibility requirements such as being owner-occupants and purchasing a home within a certain geographical area. Maximum income and loan amount limits apply. Minimum combined loan-to-value must be greater than or equal to 80%. Program funds can be applied toward down payment only. Borrowers cannot receive program funds as cash back in excess of earnest money deposits. Down Payment Grant program may be considered taxable income, a 1099-MISC will be issued, consult with your tax advisor. May be combined with other offers. The home loan must fund with Bank of America. Down Payment Grant may only be applied once to an eligible mortgage/property, regardless of number of applicants. Bank of America may change or discontinue the Bank of America Down Payment Grant Program or any portion of it without notice. Not available with all loan products, please ask for details.