He might pay to rent if these things apply to you.
- There are financial advantages to owning a home rather than renting one.
- In some cases, leasing makes the most financial sense.
- If you’re worried about your credit score or job security, leasing might be the best bet.
At this point, many potential buyers are frustrated with their lack of progress on the homeownership front. Home prices have been inflated since the end of 2020, and that alone has deterred buyers on a budget.
The problem is compounded by the fact that housing stock has been sorely lacking. This puts buyers in a position where they have to outbid homes and still risk losing. And, there has been a limited supply of starter homes on the market, which has been a particular problem for first-time buyers.
Yet you may be tired of renting and want to buy your own home. But if those three things apply to you, renting might make more sense this year.
1. You do not have a 20% deposit to pay
House prices are very expensive today. In addition, taking out a mortgage has become more expensive. In fact, mortgage rates have risen sharply since the start of the year, and they should continue to rise.
That means you probably can’t afford to make home ownership more expensive for yourself. And if you don’t have 20% to put on a house, then you can bet on your mortgage which will cost you more.
You’ll be hit with private mortgage insurance, an expensive premium that piggybacks on a conventional mortgage, when you don’t put down a 20% down payment. As such, you might be better off renting this year and waiting to buy until you can save more money to buy a home with.
2. Your credit score has recently taken a hit
As I just mentioned, borrowing for a home has recently become more expensive. And if your credit isn’t good, it could end up being even more expensive to you.
The lower your credit score, the higher the interest lender could charge you a home loan. This is because a lender tends to feel that you are more of a borrowing risk with a lower score. As such, if your credit score has recently dropped, it pays to spend time improving it before applying to borrow money for a home. And that could easily take you into 2023.
3. You fear losing your job
Many financial experts are issuing warnings of an impending recession. And this is a possibility for which it is important to be prepared.
Now, if you work in a fairly recession-proof field (for example, if you’re a pediatrician or a teacher), you might not have to worry so much about losing your job during times when economic conditions deteriorate. . But if you work in an industry that’s more likely to feel the impact of a recession (for example, you do something creative or work in travel or retail), your job may be less secure during a recession. If so, you may want to continue renting this year and put your home buying plans on hold.
As eager as you are to become a homeowner, it’s important to do so at the right time. And if these things apply to you, you might be better off sticking with a rental this year.
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