It has always been said that owning a home is the American dream. According to the latest 2021 statistics from ipropertymanagement.com, "44.1 million or 35.9% of U.S. households rent their homes." This same report states that most of the people are under the age of 45 and have attended college. Some have no other choice than to rent a home, others are qualified to purchase a home but have decided not to. Making the decision to stop renting is a personal choice.
Qualify to Purchase a Home
If you are thinking of purchasing a home, you must first be able to qualify for a mortgage. According to the same article from ipropertymanagement.com, an alarming 41% of renters spend over 35% of their income on rent alone. With all the other bills people have, this doesn't leave a lot of money for savings. To qualify for a mortgage, you need steady employment and income. You need good credit. You must meet a certain income-to-debt ratio. Many first-time homebuyers can qualify for an FHA Loan with only 3% down. If you've been able to save for a larger down payment, you may qualify for a lower interest rate and you won't have to pay private mortgage insurance (PMI) if you're able to put 20% down on a conventional loan. Interest rates are still historically low, so it's a great time to borrow money to purchase your first home.
Cost of Renting Versus Owning
There are more costs that come with owning a home, however. When you own a home you are responsible for the real estate taxes, homeowners insurance, homeowners association fees, maintenance, repairs, upkeep and the like. Renters just pay the monthly rent and the landlord pays the mortgage and all the other costs.
Advantages of Buying a Home
The number one advantage of owning a home is building equity in your investment. You can refinance or borrow against this equity for a major purchase in the future. According to an article on Zillow.com, you also receive tax deductions such as your mortgage interest and your property taxes. You make the decisions to make changes to the home. For example, you have the ability to paint the rooms any colors you like. You also have choices and make your own decisions regarding home maintenance, repairs and upkeep.
Advantages of Renting
When you rent, you have the flexibility to get up and move when your lease is over. This is great if you're new to town and are testing areas to live to see if you like them. Another advantage to renting is if your job is uncertain or you are transferred often. Income is another reason that people continue to rent. Some don't make enough money to save for a down payment and closing costs that are required to purchase a home. When you rent, you usually don't pay for maintenance or utilities.
Home values have been rapidly increasing over the past year. This is mostly due to the low inventory of homes available for sale. The National Association of Realtors estimates that the annual median home prices will increase by 8% in 2021 and by 5.5% in 2022. So even though it's a sizzling seller's market and home values are high, they are still expected to continue to climb. They will eventually level off, but a housing crisis like the one in 2008 isn't likely.