Buying a home is the biggest decision many people will make. While this can be very daunting, it is also extremely exciting. Whether you are paying rent or paying a mortgage, these are both expenses and a major part of your budget. The difference is, once you own a home that money is being invested into your future.
If you can secure a loan and find a home that fits your budget, owning is the best financial decision you can make.
Whether you are starting to invest in your future or diversifying your portfolio, real estate has shown over a long history to be a great investment. Real estate on average appreciates at 3% to 5% without you doing anything other than maintaining the home. Real estate is an asset that has continuously appreciated over time and is something that is tangible and usable. It has remained one of the best ways to hedge rising inflation and protects the owner from rising rents.
Renting is more expensive over time for various reasons. A lot of people think about what they are paying in rent now when comparing it to what their mortgage payment may be, but as rents continue to rise for the remainder of your lifetime, your mortgage will remain the same.
Once you've made the decision to invest in your future, it is important to do your homework.
Talk with a lender. A lender can let you know where you stand, what you can afford and how you can get to where you want to be. A lender can give you advice on credit scores, affordability and the cost of buying a home. Having pre-approval from a lender lets buyers and agents know what to be looking for and gives them the ability to act when they find the right home.
Create your budget. Figure out what you can afford each month based on your personal finances. This will allow you to stay disciplined and know what you will be comfortable buying when the time comes.
Do your research. Explore different areas and do your best to figure out what is most important to you in a home.
The most important thing when buying a home is making sure that you can afford it. If you believe interest rates will continue to go up, you will feel good being at the rate you are at when you buy. If rates go down many people will have the opportunity to refinance at that lower rate if that time comes. There is generally a cause and effect with real estate that if the interest rates go down, demand will go up, causing prices to go up. Unlike the volatility of renting, the beauty of buying is that your mortgage is locked in, unless you choose to refinance, in which case most likely you would be doing so to lower your mortgage.
Bottom line? When you are renting you are paying someone else's mortgage. When you own you are investing in your future.