Buying a Home Versus Renting

First-time home buyers have an opportunity to own a piece of the American Dream. Although, many renters are largely unaware of low-down payment options for home buyers in Arizona, California and Colorado. If you’re weighing the benefits of buying a home or continuing to rent, Mindful Money provides some helpful insight.

Why Rent a House or an Apartment?

Millions of folks are long-term renters.

So, what’s wrong with renting?

Renting a house or an apartment is typically an easier way for individuals and families to obtain a place to live. Landlords offer many incentives and low-cost move-in options to attract qualified tenants. 

Motivated individuals who are searching for desirable properties to rent near work, schools and nearby activities might sign a 12-month lease for a safe place to live.

Some apartments offer short-term rental options for time frames, such as month-to-month, three months or six months.

Renting a house or an apartment has more flexibility than homeownership, when compared to quick relocation options.

Unlike homeownership, rental costs are subject to annual increases. Unforeseen rent increases could eventually squeeze a family’s finances too tightly.

In most instances, rental payments are not tax deductible (clarify with your tax professional).

While property owners are responsible for upgrades and repairs, renters are usually limited to general aesthetics and nonpermanent designs. 

Benefits of Buying a Home 

Owning a home can lead to more backyard barbeques and fewer transient neighbors.

Areas with a large percentage of homeowners often contain hardworking families who take pride in the community.

Unlike fluctuating rental rates, homeowners can obtain fixed-rate mortgages for terms that may be secured for up to 30 years. 

There’s a myth that a 20% down payment is needed to buy a home. 

Prospective borrowers may not realize that mortgage professionals offer loan programs that do not require a 20% down payment to buy a home. 

Buying a home with a 20% down payment can eliminate mortgage insurance on conventional loans, but most purchases are completed with much less.

Another myth that surrounds the decision to buy a home or to rent is credit scoring. Renters may not understand qualifying credit requirements.

The Experian website mentions 670 credit scores or greater are desired among landlords and property management companies for apartment rental requirements.

Credit scores for home buyers without a down payment or limited funds start at 580 points.

However, Mindful Money offers financing for home buyers with a 500 credit score, who can make a down payment of 10% or greater.

Sometimes, less money is needed upfront to buy a home versus renting.

For example, a home that rents for $2,500 might require the tenant to furnish $7,500 for the first month’s rent, the last month’s rent and a security deposit that is equal to one month’s rent. 

In some areas throughout Arizona, California and Colorado, a buyer may find townhouses, condominiums and starter homes that are priced between $225,000 and $250,000, where $7,500 could be used toward a 3.5% down payment on an FHA mortgage loan.

When using down payment assistance programs in AZ, CA or CO, to buy a home, the $7,500 mentioned above could be used toward closing costs or reserves.   

Homeownership offers many tax advantages, where borrowers may be able to deduct a portion of their mortgage payment and property taxes (check with your tax advisor).

Property appreciation is one of the greatest benefits of owning a home versus renting.

Money that’s used toward rent serves a meaningful purpose, however, once the funds leave a renter’s account, the property owner receives a financial gain.

A homeowner's net worth increases as monthly payments are made toward the principal balance and as the value of the home increases.

Renting or buying a home depends on your current financial situation and your long-term goals.

Speaking with a mortgage professional at Mindful Money is a great way to get answers to specific questions about the home buying journey. 

Contact Mindful Money today at (480) 386-1578.