A lot of people face this confusion about whether they should buy a house or rent one. However, the answer to that question depends on personal circumstances. Buying a house is considered to be a huge life event and a financial milestone. If you can afford the down payment on a house that has appreciation value down the road, and if you plan to keep the property for a minimum of 5 years or more then buying will sound good.
It depends on a variety of factors like your finances, plans, and priorities. Port Aransas real estate has outlined a few steps that you can follow to figure out if buying a home is right for you or not -
Assessing your finances
The first step involved in the rent or buy decision is whether you can afford to buy a house or not. Let us take a look at the following numbers before going any further -
Down payments
It is possible to buy a home with a down payment of 3% of the purchase price in some cases. But, when you do so, it will mean taking more debt. Unless you have a very compelling reason to take the plunge and you cannot wait until you have 20% of the down payment. It will be a good idea to wait until you have more cash, and then proceed to buy homes for sale in Port Aransas.
While 20% might sound like a lot of money, it will save you the money on interest and private mortgage insurance. Private insurance mortgage can range up to 0.58% to 1.86% of the money each year. Not to forget, you will also need some cash to cover the closing costs which will be 3 to 6% of the purchase price.
Emergency Savings
You can think of buying houses for sale in Port Aransas once you have your emergency funds sorted. Emergency funds account for 3 to 6 months of your expenses. It serves as a fundamental building block for good financial health and should be prioritized before any investment. You can keep your emergency fund in an FDIC-insured account. This will allow you to earn interest in it and avoid any market-related risks.
DTI or Debt-to-income ratio
Lenders will always look at your front-end and back-end Debt-to-Earn ratio before deciding to work with you. In order to determine your DTIL, you need to divide your monthly housing expenses with your monthly gross income. As for the back-end, you need to divide all the monthly expenses which include the projected housing loan, credit card payments, etc. with your monthly gross income. Most lenders will be willing to work with you once your front-end DTIL is below 28% and your backend DTI is below 36%. Once you reach there, you are all set to buy Port Aransas homes for sale.
Credit score
A good credit score is a key factor in getting your mortgage approved. Hence, you must do whatever you can to boost your credit score before you call your mortgage broker, even if it means holding off the home buying for some time. For improving your credit score, use less than 30% of your credit card available credit and pay off the entire credit bill on time every month. Refrain from canceling old credit cards even if you no longer use them.
Investment accounts
If you are saving up to buy a home with a taxable amount, you can liquidate some of it and make a down payment. But, be sure to pay the taxes on your realized gains. Leaving the retirement accounts aside, you should make withdrawals from other investment accounts. You are likely to face some fees and early withdrawal penalties. Hence you must consider these factors before proceeding to buy a house.
Consider the “five-year plan”
Suppose you are in great shape to buy the house. The next thing you need to do is to step back and think about your future. The main question you need to ask yourself should be where you would want to be in the next 5 years. If you have a specific geographical location as your answer, it surely will be a great idea to buy a house. But, let’s say you are not quite sure about where you would like to live in the next few years, then renting can be an option to consider. It is practically an inexpensive option than buying if you want to live short term.
You should consider buying a home only if you plan to live in it for a minimum of 5 years. That will be the time period for your house to appreciate in value and make up for the transaction costs you will pay. When buying a home, there are certain fees that you need to pay, like closing costs which can range up to 2 to 5% of the purchase price of the house. Similarly, you will have to pay certain fees in the future if you decide to sell the house that can range between 2 to 4% of the sale price. When buying and selling houses, 15% of the home’s value go into the transaction cost and fees. Hence, buying a house where you intend to stay for the long term will be the wise thing to do.
Scope out the location
Location matters a lot when buying a house. Hence you need to familiarize yourself with the housing markets you are targeting. Say you love the cinnamon shore in Port Aransas. Hence you need to familiarize yourself with that area. You can check out homes for sale in Cinnamon Shore right here.
Start by gathering the data you need. Proceeding forward, think about the type of home you want, the size of the house, the amenities, style of the house, etc. then go ahead with researching the costs to rent and buy such a comparable home in your area. Your Port Aransas real estate can help you with that.
How much do you want to buy?
Buying a home is surely a big financial decision, and it has huge psychological benefits as well. A home is not just a thing you own; it is a place where you spend the most precious years of your life, a place where you start your family. A lot of emotions get attached to the house once you start living in it. Hence, it is very important to determine what you want and then take the final call.
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The bottom line
When finding answers to the question “should I buy a house or instead rent one?” you must note that it is extremely personal and there is no wrong or right answer to it. But, as you know the advantages of owning a house, you must ask yourself, “Is there a reason not to buy?”
Buying a house has its own set of advantages and if you are financially stable to buy a house, by all means, you should go ahead with it.
If you are planning to settle in Port Aransas and looking for houses for sale here, Port Aransas real estate is here to help you find your dream home. Contact them today to know more about their services.