Renting vs Buying a Home
by Marquita M from Milwaukee, Wisconsin and from Hill from Portland, Oregon
Marquita asks Kate about renting vs buying a home and Hill has questions about his large down payment. (Find Hill's question in the comment section below.) Kate, My question is should we rent or buy a home? To live the American Dream... where should we start and what should we do so that we can become homeowners and stay above water?
Me and my husband together make like almost $45,000 a year, I believe if I am counting right and our credit score is 560 and 580. Would we even have a chance? I am ready not sure how to go about everything and what is best for us. Thank you for your time, Marquita
Kate Answers: Renting vs Buying a Home
Buying a home is a large, long-term purchase. And in the end, only you can decide if renting or buying a home is better for you.
Of course, I am partial to home buying whenever possible. Regardless, let's look at a couple of ways you can come to your own conclusion.
Babe Ruth and Home Buying
You may already know that well-meaning people seem to come out of the woodwork to tell their "nightmare experience of house shopping" which can be paralyzing to more than a few would-be home buyers.
But Babe Ruth said,
"Never let the fear of striking out get in your way."
So this is the first piece of advice I would offer. Don't let horror stories frighten you from jumping wholeheartedly into the home buying process. What's the worst that can happen if you are not approved for a loan? You rent another year until you get your ducks in a line to try buying again.
Affordability and Buying a Home
Secondly, consider how much you can afford. A lot of home buyers lean on the bank to tell them. But when you are shopping for a house to rent, you pick which rentals to go see, based on your budget. A home purchase is no different.
Remember that mortgage companies follow general guidelines set forth by government entities to qualify home buyers. Based on that, keep in mind that banks will qualify
you for a mortgage. But don't assume their analysis means you can afford
the home loan they offer. Go to How Much Mortgage Can I Afford
for more details on looking out for yourself.
Mortgage Pre-Approval and Home Buying
Thirdly, get yourself lined up for Mortgage Pre-Approval
. Think of pre-approval as a trial run for the actual mortgage process once you've made an offer on a house. The test drive. It can help you decide whether you want to buy a house or continue being a renter.
But again, don't be afraid to borrow less than the bank will loan you. Only you know what you can afford. Get the rest of the lowdown on Mortgage Pre-Approval here
Credit and Buying a House
During mortgage pre-approval, the bank will look at your credit report and give you a game plan to improve your credit scores. That will be beneficial for renting or buying a home.
Now if the bank says you have a year or so before buying a house, you can always rent and
at the same time work on improving your credit
Ask Kate or Comment
Marquita, one more thing. Is this page is helpful to you? I'd like to hear back from you. You can comment on this page. (Follow the link near the bottom of the page.) Or Ask Kate another question
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