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The American Dream is a home of your own. For many that means renting and for others that means owning. Approximately sixty-four percent of the population in the US own their home. As of 2017, thirty-six percent of the population rent their home. If you rent, are you thinking of buying a home this year? And if you are, what made you realize that you are now ready to buy a home?
Check yourself against these five factors to see if you’re really ready to buy a home and quit renting.
What are the signs you’re ready to buy a home?
- You are not planning to move — As a renter, you may be leasing month to month or year to year. This gives you flexibility to relocate, pursue jobs in other geographic areas and change your home when you decide you don’t like it anymore. Owning a home requires you to stay put. So, if you’re happy in your stable job, love the area where you live and don’t see yourself pulling up stakes anytime soon, you might be ready to buy.
- Your expectations fit your wallet — Not every home buyer gets their dream home with their first purchase. HGTV has set high expectations for most every buyer.
Do your expectations fit your home purchase power? Before making the decision to purchase a new home, visit homes in developing neighborhoods to see what they cost. Understand what the standard options are and what upgrades cost. Consult a mortgage lender to determine how much home you can afford and compare the two. If you have a significant gap between your wants and abilities, it’s time to either adjust your expectations or save more to get exactly what you want in the future.
- You have personal financial maturity — In general, buying a new home means you have saved a down payment and the cash for closing costs and have a stable, regular income, and manageable debt.
Home ownership comes with a larger responsibility — keeping your home well-maintained [Read our articles on home maintenance.] It also means you have the monthly income to cover homeowner’s insurance, mortgage insurance, and home maintenance costs. And for most this implies you have the self-discipline to reserve money for those unexpected home repairs.
- You can’t find a similar or larger place for the same rent — Wanting more space, more features and more amenities is one of the primary reasons people purchase a home.
Homebuilders frequently market homes comparing the price of ownership to the cost of rent. So, how does this stack up if you want more and are tired of paying rent?
The average rent for an apartment in the Charleston market is $1,113 and according to Trulia, “The median rent per month for apartments in Charleston for May 8 to June 8, 2017 was $1,800.”
In May 2017 the median sales price for a new home in the Charleston Trident area was $260,000. Provided you pay 10% down, and get a 30-year fixed rate mortgage for 3.67%, your monthly principal and interest payment might be $1,146.47, which is pretty close to rent! And if you compare this to the median rent, even after adding in annual real estate taxes, insurance and mortgage insurance, you’re still coming out better at $1,500.64 for your mortgage payment.[Check out our Mortgage Calculator]
It’s easy to see that in a market like we have now, homeownership is a very attractive proposition when compared to rent.
- You want to build your personal wealth — Owning a home is the single most popular way to build wealth in the US. It can be said that renting is throwing money out the window.
Is it true that owning can increase your wealth? It can, provided the economy remains stable and home prices in your area are steady or increasing. However, as was experienced by many people who purchased homes at the high point of the market in 2005, and went through the subsequent recession, equity was lost.
You can gain equity if you plan on owning your home more than two years and provided the real estate market remains stable. In a market like Charleston’s where prices have been steadily increasing year over year, and new manufacturing and jobs are coming in droves, gaining equity is a strong probability.
How’d you do? If you can answer a solid yes to every one of these items, it’s time to start looking for a new home. Congratulations!
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