Renting vs Buying a Home

by Marquita M
(Milwaukee, Wisconsin, USA)

Ask Kate about renting vs buying a home: Kate, My question is should we rent or buy a home? I am ready not sure how to go about everything and what is best for us...

Marquita continues... 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?

To live the American Dream... where should we start and what should we do so that we can become homeowners and stay above water? Thank you for your time, Marquita

Kate Answers: Renting vs Buying a Home

Dear Marquita,

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.

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Best wishes,

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