Housing Market Strengthens: Should You Rent or Buy
Should you rent or buy? It’s the million dollar question, and the answer depends largely on your individual circumstances, and of course, the housing market.
The housing market plays a role in whether people buy or rent. Because of shifting trends, renting is sometimes the cheaper alternative across the board. We’ve seen this in the past when home prices have skyrocketed. But according to the Beracha, Hardin & Johnson’s Buy vs. Rent (BH&J) Index, the U.S. housing market is moving into “buy territory,” which is excellent news if you're a first-time homebuyer or moving up.
The report examined the entire U.S. housing market, with emphasis on 23 major cities for comparison. According to the report, “researchers measured the relationship between purchasing property and building wealth through a buildup in equity versus renting a comparable property and investing in a portfolio of stocks and bonds."
The report found that 15 of the 23 markets are “solidly in buy territory,” with the cost of owning lower than the cost of renting in these cities. “Only three cities — Dallas, Denver and Houston — present scores that are worrisome in terms of local housing market conditions.” With home prices stabilizing and rates remaining at historically lower levels, now’s a good time to purchase in many cities across the U.S.
But even if prices in your area are opportune for buying, it may not be the right time for “you” to buy. Ask yourself:
- Do I have enough in savings for a down payment and closing costs? Down payments can range from 3.5% to 5%, and closing costs can range between 2% and 3% of the purchase price. Just about every home loan requires a down payment, with the exception of a VA home loan and a USDA home loan. If you have limited resources, our mortgage experts can discuss low-down payment options including grants.
- Can I qualify for an affordable mortgage? It isn’t enough to qualify for a mortgage, can you qualify for an affordable mortgage? You can get a mortgage loan with a credit score as low as 620 (or 500 to 580 with an FHA loan), but you’ll likely pay a higher interest rate. Improving your credit helps you qualify for a low-rate mortgage and the most affordable monthly payment.
Stable home prices and low interest rates create the perfect climate for getting a mortgage. Apply for a home loan now and lock in a low rate.