When Should You Stop Renting?

    When is it time to stop renting a home and seriously consider buying your own place?
    That’s a personal question and a very personal decision — it really depends on your
    lifestyle, your finances, your employment plans, and many other factors that could
    make buying a house a really good idea, or an absolutely terrible one.
    To figure out where you are on the homeownership spectrum and decide what the best
    move is for you, personally, here are 5 signs that you should probably keep renting and
    11 indicators that it’s time to think seriously about buying a house.

    Signs that you should keep renting

    You’re not confident that your income will increase in the future
    In many markets, you don’t actually need to make a lot of money in order to buy a
    house, but it’s always smart to go into homeownership with the confidence that your
    income and earning power are only going to go up in the near or distant future. Even
    though renting can be cheaper than buying in many markets and under many
    circumstances — and even though rent prices tend to increase faster than home prices
    in most places — your property taxes will go up as a homeowner; you’ll also be on the
    hook for home repairs, and if you want to make any improvements or even just keep
    the house you buy looking as good as it did when you bought it, all of that will require
    money.
    So if you’re working at a job where your hours or income are uncertain, where there’s
    little to no room for advancement — and it’s like that everywhere in your field — or
    you’re in school and will be in school for a few years, then it might not be the best time
    to think about buying.

    Homes in your area take a long time to sell

    Some markets are hotter than others, and when the time comes to sell your house, it’s
    a lot better to be in an in-demand market than to have a house that takes a long time
    to sell. Many people don’t want to deal with or can’t afford to pay two mortgage

    payments at a time, so waiting to sell before finding a new place to live is a must for
    households in that situation. When you’re ready to move on, you’ll want to move on
    quickly, so it’s best to buy in a neighborhood or market where you can be relatively
    certain that the house you’ve yet to buy will be a quick sell.
    You can look up average days-on-market information for the city and even state where
    you live online, but to get the most detailed information about places you’d consider
    buying, it’s probably a good idea to check with an agent or someone else who knows
    the area well.

    You want to move around to different
    neighborhoods or different areas

    There’s no sense in buying a house if you don't know whether you even want to stay in
    the neighborhood! One advantage to being a renter is that you have the ability to leave
    and try somewhere else as soon as your lease is up, and there are plenty of renters
    who appreciate and even love this aspect of a renter's lifestyle. It can be a lot of fun to
    change things up and try something new, after all!
    People who are feeling a little more "settled" in life and ready to try staying in one place
    for a spell could definitely benefit from considering homeownership, but if that’s not
    you, then renting is probably a better bet for right now.

    You have a lot of debt and no significant savings

    It’s not impossible to buy a house when you have debt like student debt and credit card
    debt — but if your level of debt is overwhelming, then you won’t get the best possible
    deal on your mortgage loan because your credit will likely be lower than it could be.
    Likewise, mortgage loans typically require a down payment; you don’t need a full 20%
    down in some cases, and some loans have 0% down terms, but to secure most loans,
    you’re going to need some money stashed away. In addition to the down payment, you
    have appraisal and inspection fees, closing costs, and time away from work that you
    might need to spend looking for a house and dealing with the transaction itself.
    If you’re in a situation where your level of debt is high and you really haven’t saved
    anything up toward buying a home, then it’s smart to tackle both of those financial
    realities first and foremost before you start shopping. While you’re getting everything in
    order, keep renting.

    The kind of place you want to buy is unavailable

    Even if none of the above applies to you, it still might not be a great time to think about
    buying a house. Mortgage loans are issued with the understanding that you’re going to
    stay put for several years (if not decades), and so settling for a place that isn’t quite
    right just to get your foot in the homeownership door can be a terrible move. To avoid
    paying capital gains taxes on a home sale, you’ll need to live in the house for at least
    two years.
    So if you really want a yard (or have to have one for your pets or family members), for
    example, and there are no homes for sale with any yards to speak of — or only yards
    that are adjacent to busy streets — then it’s usually smarter to keep working on your
    credit, building up your savings and renting a place from someone else than it is to buy
    a house that you’re not sure is right for you. If it's not and you need to move, you
    could end up losing lots of money on the deal instead of accruing equity and selling
    higher than you bought.

    Signs that you should consider buying

    You know you’ll be in the area for some time

    Whether it’s because you’ve fallen in love with a neighborhood or market and can’t
    imagine leaving, or because the job opportunities in your city are better than anywhere
    else in the country, when you know that you want to stay in an area for a long time, it’s
    a good idea to think about buying a house there. You’ll be building equity while you pay
    your mortgage and housing prices tend to increase over time (apart from regular
    market corrections), so if there's a lot keeping you where you currently live, then you
    should seriously consider becoming a homeowner.

    You don’t have any debt

    Mortgage lenders look at your debt-to-income ratio when they consider issuing a loan,
    and this can influence your mortgage interest rate, among other factors. To save
    money long-term, it’s a good idea to get yourself in the best financial shape possible
    before applying for (and securing) a mortgage loan, which is why you might want to do
    it after your student loans, credit cards, car payments, and any other outstanding debts
    that you have are all free and clear.

    Of course, you might not want to go into debt again so soon after digging yourself out,
    especially a big debt like a mortgage, but if you ever want to be a homeowner
    someday, then thinking about it when you’re debt-free is one of the biggest favors you
    can do for yourself.

    You have an emergency fund

    Another way you can show mortgage lenders that you’re a good prospect for a loan is
    by increasing the amount of money in your savings account. This could be for a down
    payment (more on that below), but it can also be simply an emergency fund that you
    add to and try never to tap except for, well, emergencies.
    By saving up an emergency fund, you'll show a mortgage lender that you know how to
    save and are responsible financially, which can also lead to a lower interest rate and
    better terms on your mortgage.

    You have some down payment money saved

    One of the biggest expenses involved in homeownership is the down payment. Again,
    not all loans will require a down payment; there are some loans (like those issued by
    the VA) that don’t ask for any money down, and also programs by the Federal Housing
    Administration (FHA) that will let you put as little as 3.5% down on a house.
    That said, the programs that allow you to put less than 20% down also usually require
    private mortgage insurance (PMI) on the loan in addition to paying for the loan
    principal, interest, taxes, and insurance every month. This PMI amount is calculated
    depending on the loan amount borrowed. So to save the most money over the lifetime
    of the loan, it’s smart to get as close to that 20% magic down payment as you can.

    Your credit is good

    One of the biggest ways that lenders assess your ability to pay back a loan is by looking
    at your credit score. If your credit is good and the rest of these financial attributes also
    apply, then it’s probably a really good time to think about buying.
    Your credit score is based on multiple factors, including how much credit you have to
    draw from (think of this number as an equivalent to your account limit on a credit
    card), how much credit you’ve used, how good you are at paying back debts you owe,

    and a few other bits and pieces. If you’re worried about your credit score, one of the
    best things you can do is to make sure to pay all your bills on time and try to pay down
    any existing debt that you have.

    You feel comfortable tackling basic home repairs
    and own some tools to do it

    Renters have it easy in that when something happens to the place where they’re living,
    they can call someone else to come and fix it — and they won’t be charged for it. That’s
    not the case when you own the house you live in. Hot water broken? Toilets won’t
    flush? Lights flickering? You’re going to have to call someone to fix it for you … and pay
    them.
    Some homes come with a warranty that can help offset some of this cost, at least for a
    few years. You can always ask your agent if a warranty is an option for you when the
    time comes to buy. But if not, it’s a good idea to familiarize yourself with some basic
    requirements of homeownership and the tools you’ll need to fix minor problems.

    You can’t rent an equivalent home for the cost of
    buying

    This might be hard to determine, but you can look for online calculators (The New York
    Times has a good one here: https://www.nytimes.com/interactive/2014/upshot/buy-
    rent-calculator.html?_r=0) that will let you punch in several different numbers and
    fields, including the price of the house you want to buy, interest rates, how much
    money you’re putting down, how long you want to stay there, and so on, and then will
    use some advanced math to tell you how cheap rent would have to be to make renting
    less expensive (long-term) than buying. If you can tell immediately that there's no way
    to rent a house like the one you want to buy for the rent price quoted, then you’re
    getting a good deal.

    You want to customize your home

    Although renting does have its perks, one thing that a lot of renters don’t like is the fact
    that the home isn’t really theirs, and they can’t treat it as such. What if you want to

    build a fence or even do something simple like paint the walls? Better check the lease!
    When the house is yours, as long as you follow local permitting guidelines, you can be

    as creative as you want and do as much as you want to the place to really make it feel
    like home. You can redo the kitchen or the closets, turn your bathtub into a
    shower/bath, plant flowers, start a garden — and mow the lawn on your own schedule.

    You’d like a little more privacy

    Most of the time, a house or condo you buy is going to have more privacy than one
    you’re renting. This is partly because you can usually get more square footage for your
    dollar when you’re buying a house (and hence more privacy), but it’s also because of you
    don’t have to consider the preferences of a landlord who might want to stop by every
    now and again.
    If you’re starting to feel the strain from feeling like there are constantly people around your
    rental abode, then it might be time to start thinking seriously about buying a house.

    You want more stable monthly payments

    Some metro areas have rent control, and this might not apply there, and others place
    limits on how much a landlord can raise rent every year, but many do not. It’s not
    unheard of for a renter to pay increasingly higher rent every year.
    Although your property taxes will go up as home values increase, as a homeowner,
    your mortgage payment is going to be stable over time — despite inflation. You’ll be
    paying about the same amount toward the end of your mortgage as you did at the
    beginning, especially if you take care to keep your escrow account balanced. Knowing
    that you’re not going to pay any more for living where you do year after year can be a
    huge weight off your mind, and your wallet, and can give you more bandwidth to save
    for things like renovations and vacations if your income increases, too.

    You feel emotionally ready

    Buying a house can feel in many ways like getting married: it’s both exciting and
    terrifying. First-time homeowners might cycle through feelings of elation at finally
    having a place to call their own, then experience sudden doubts that this is really the
    right place, that you’re getting a good deal, that you want to stay in the area — all of
    those feelings are very normal.
    But also like getting married, you probably know when your doubts are just a side

    effect of the commitment you’re about to make … and when they signify something
    deeper and more troubling. When you feel like you’re emotionally ready to take a step
    toward homeownership, then it’s time to start thinking about shopping for a house.
    Only you can make the best decision for your current situation and lifestyle, but if you
    have questions about the housing market and how much money you’ll need to become
    a homeowner, then check with a real estate agent who can help clear up any mysteries,
    helping you make an educated decision.

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