Should I Rent Or Buy a Home? | Mint Personal Finance Tips Video

Should I Rent Or Buy a Home? | Mint Personal Finance Tips Video


This question comes from Eric
from Mint’s Facebook page. And Eric asks, when is it better
to own a house than to rent? This is a great question, Eric. And it’s kind of a
timeless question but it’s also very
timely question because with the foreclosure
crisis that we’ve been through, we’ve seen a drop in the prices
of housing across the country. And with rates where
they are today, it’s actually a great time from
an affordability standpoint to be considering
your first home. So that’s the good part. The things that you need to
consider as a first time home buyer, the most
important consideration that I can throw
out there for you is that you need to be
committed to being a homeowner. It’s a little bit different
than being a renter. You’re going to have to– any
maintenance or repair work that needs to be done
to the property, you’re going to be
responsible for that. So it’s a big difference. It’s kind of like a marriage
or having your first kid, this is a commitment that you’re
going to have for a long time. But from a standpoint of
how does it make sense from a financial perspective
on investment on a house, you’re probably looking at a
commitment of about five to ten years in order for the
price of housing to come up and for that investment
to make sense. So think about this in
the long term sense. The second
consideration is going to be not to get
in over your head. One of the factors that is most
important in home ownership is, can you afford
that property. Typically a good rule
of thumb for that number is you’re looking at
about three to four times your annual income
is kind of a good starting point for your affordability. Now the question comes
in, can I afford the house that I want to live in compared
to where I’m renting currently? And also you have
to factor in, do you have the down
payment you’re going to need in order to
get into that house. So that is indeed an important
factor in considering. And then the last factor
is to compare the payment. So if you’re looking at paying
maybe $1,200 in rent currently, where are you going to be
on your mortgage payment from an affordability
standpoint? So there’s some
great tools out there to figure out where
affordability is. One great tool that you can use
is the New York Times came up with this rent versus
home ownership calculator you can use. And the easiest way to
find that is to Google it. You can just put in New
York Times rent versus own, and you should be
able to find that. Thanks for the question, Eric.

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