Renting vs Buying a Home - FAQs

The last year has brought on plenty of changes for people. One of the biggest changes-the number of people who decided to move. With opportunities to take advantage of low interest rates and plenty of other factors weighing in, many families and individuals have had to ask themselves the question “Should I rent or buy a new home?”


While everyone’s situation is unique, there are a few things to consider when you are looking to rent vs buy a property. If you are thinking now may be a good time to buy a house, we have pulled together a list of some of the top FAQs when comparing renting versus buying a home.



Do I Have to Have a 20% Down Payment to Purchase a Home?

The short answer is, no, you don’t have to have 20% down in order to purchase a new home.


Determining your down payment options is probably one of the largest deciding factor in renting vs buying, and is usually one of the scariest steps for first time home buyers.


Generally speaking, when you rent, you only need to put forward funds like first month, last month and security deposit in order to secure a place to live. When you buy, however, you need to provide a down payment to the bank in order qualify for a loan.  While conventional wisdom says you should try to put down 20% as a down payment, the reality is, in order to qualify for a home loan, whether it is an FHA loan, VA loan or conventional loan, you can often put down less. In fact, some loans only require you to put down about 3% of the cost of the home.


The biggest thing to remember though, as you evaluate renting vs. buying, is that your down payment will directly impact the overall cost of your home. That is because the more you are able to put down initially, the lower your financing charges (and thus your monthly payment) will be each month. Putting down a larger down payment can also help you avoid other added expenses, like PMI. PMI or private mortgage insurance is something you may be required to pay if your down payment is below 20% of your purchase price and it can add to the cost of your loan as much as $2,000 a year, so it is definitely something to consider.


Net, while it is not required to have 20% down payment to purchase a home, if you want your monthly mortgage payments to be lower and avoid paying high prices for private mortgage insurance, it’s best to wait until you have a 20% down payment, or close to it, to better manage the cost of purchasing a home.



Can I Still Buy a Home If I’m In Debt?

One of the biggest questions people have around buying a new home, is, whether they can do it if they have debt. While things like credit card debt, student loans and more can impact the home you might be able to purchase, it is not impossible to buy a home, even if you are in debt.


Here are the biggest things to remember when evaluating how your debt may impact your rent vs buying question.


Take Stock of Your Total Debt

Make sure you have a full picture your debt. Whether its credit cards, medical bills, an auto loan, or student loan payments you want to make sure you have a full list of what you owe, and to whom, each month.


Compare Your Debt to Your Income

When it comes to qualifying for a loan a lender will look at your monthly income and compare this with the monthly payments you’re making to your creditors. Most of the time, your mortgage application won’t be approved if all your monthly payments, including your potential new mortgage, is more than 43% of your income each month. This calculation, known as a debt-to -income ratio is a major consideration point when evaluating whether you should be renting versus buying.


While debt can make it difficult to qualify for a loan, having debt doesn’t meaning buying a home is out of reach.  If you find that your current debt-to-income ratio is too high, but still want to make plans to a home in the future, it’s best to continue renting, pay off more of your debts at a pace that works for your budget, and try again later. Sometimes this patience can really pay off and can help you secure a better loan or nicer home then you would expect.



How Will I Pay for Home Repairs?

One of the biggest switches in renting vs buying is who is responsible for fixing things when they go wrong.


When you consider the average cost of renting an apartment, you don’t have to factor in paying for repairs, because it is covered by your rent. If an appliance breaks in the property you’re renting, the landlord is responsible for finding a professional to fix it. However, if your washing machine or dishwasher breaks in the home you own, you’ll have a find a repair professional and pay for the services yourself. In fact, you’ll have to pay for all of your home’s maintenance out of your own pocket. This means you could spend hundreds or thousands of dollars at a time for repairs or replacements.


When figuring out whether you want to rent or buy, be sure to take these repair costs into consideration and have a plan so you can take care of these issues as quickly as possible. One way to make sure you always have a little on hand is to open a saving account reserved for home repairs months or even a year in advance so you’ll feel at ease once you move into your new residence. In general, you should plan to have at least 1-3% of your home’s purchase price available each year to handle any repair or updates that you might need to make.


While there is a lot to consider when looking at renting vs. buying, you don’t have to tackle the situation on your own. If you’ve decided that buying a home is the best move for you and your family, the home builders at Pulte are here to help. With customizable new homes near you, state-of-the-art features and a dedicated team backed by our industry leading 10-year structural warranty, you can feel inspired to create the residence you’ve always dreamed of.



Contributed to Your Home blog by Tamiya King

Looking for more tips, ideas or inspiration? Return Home here.

Published 2.4.2021

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