My family and I recently moved to a new city where the real estate market has been pretty hard hit. We are now faced with the question do we purchase a home or do we become long term renters and invest our cash? We're very nervous about investing in real estate even though interest rates are so low.
As the gentlemen who answered previous to me indicate, the decision to purchase a home is not simply a financial choice. A number of financial and non-financial factors play into the home purchasing decision, including, but not limited to:
-How much money will you put as a down payment and what will your monthly payment be?
-To where will you move? Neighborhood choice can affect a number of local costs or decisions, including property taxes or school quality. -What kind of loan can you get? Qualifying for a mortgage depends on three factors that are often referred to as the “approval triangle”: 1) Income (debt ratio), 2) Credit (median credit score), and 3) Equity (loan to value ratio). The stronger each of these elements is for you, the more likely you will qualify for a favorable rate loan.
-Can you buy an affordable property that is still enjoyable to live in (high enough quality) and is in a neighborhood that you like? How does that compare to what is available to rent? -Do you want to handle repairs, improvements, tax payments, and all of the parts of home ownership for yourself, or do you prefer to let someone else deal with it? -Are you okay with the risk that you may have to move at a time when you are not ready if you rent and the owner decides to sell?
-Are you going to have to remodel before you can move in? How much will that cost? Do you have the stomach for remodelling?
-Will you fit in with the community where you can afford a home? -What is your potential for income over the next 5-10 years?
-How do you handle having debt? Does it keep you up at night, or are you fine with it?
-Do you have money you need for a down payment?
As you can see, this list is long when you consider buying a home. Think first about what you want for your family --- what do you value in your day to day living and then look to see what the housing options are that align with your values. Don't rush the choice. Take the time to consider all of the factors. "Low interest rates" is not the #1 consideration to buy for sure. It just helps keeps the cost more reasonable --- and possibly open up more options --- if you do decide buying is right for your family.
hi: You need to look at a home as a place to live: NOT an investment. Right now, with the tax deduction for mortgage interest, owning a home, in many areas is less costly than renting.