Housing costs typically take up the majority of a consumer’s take-home pay each month. So when individuals are determining whether to purchase a home or rent an apartment, it’s important to weigh the financial pros and cons before making a decision.
Individuals who are on the fence can start by enrolling in housing counseling or speaking with a home professional. Counselors can educate individuals on the home buying process, including how to search for homes and lenders, compare mortgage rates, improve their credit score and gather all the necessary documents for the application process. In addition, counselors can also help consumers examine their budget to determine how much of a mortgage they can truly afford. After counseling, consumers may have a better idea of what their feasible options are.
Price is one of the first aspects consumers may consider when shopping around for a home or apartment. While mortgage rates and home prices are low and rental prices are growing, housing costs may largely depend on location. For this reason, consumers should explore homes and apartments on the outskirts of large metropolitan areas, which tend to be more affordable. As a general rule, most counselors deter consumers from signing on to a mortgage or lease that takes up more than 28 percent of their monthly income. However, for those who consider purchasing a home, this percentage also includes all facets of homeownership, not solely the mortgage., including property insurance, maintenance and fees.
U.S. News and World Report says, individuals should also consider whether buying or renting a certain property will still allow them to save money. Putting too much money toward housing costs and trying to keep up with other day-to-day needs may make it difficult for consumers to contribute sufficiently to savings, retirement and other wealth-building vehicles. In addition, individuals who are paying for health insurance on their own should make sure their housing needs do not interfere with their ability to protect themselves.
Lastly, consumers should factor in additional costs that their housing option may require them to take on. This includes furnishing a home or apartment, maintenance, insurance, utilities and services, such as trash pickup. Once adults consider all of the factors associated with owning or renting a home, they may be better equipped to make a more informed decision.