Should you buy a home or rent? It’s a question many people wrestle with at some point in their lives. As you weigh the pros and cons of each, don’t be fooled by these four buying vs. renting myths.
Myth 1:
If it’s a buyer’s market, you should buy now.
You should never purchase a home based solely on the market. Instead, let your own financial standing be your guide. That means figuring out how much you can afford to spend each month on housing and sticking to that number.
Remember, the cost to buy a home is just the beginning of your expenses as a homeowner. You’ll also need to pay for home insurance as well as general upkeep. These extra expenses add up quickly, so the last thing you want is to overextend on the price of your home. Read more about the importance of your financial health.
Myth 2:
The tax advantages from owning a home are so great that you should always buy.
Due to recent changes in tax laws, the tax advantages of owning a home aren’t as helpful as they once were. For example, there’s a limit on the amount of state and local taxes you can deduct on your federal return. Please remember that tax laws differ by state, as well as the tax bracket you’re in, so check with your tax professional to help decide what makes sense for you.
Myth 3:
You’re throwing money away by renting.
Not true. At the end of the day, renters are satisfying their need for a comfortable, safe roof over their heads just like homeowners. So how can that be throwing money away? Plus, renters benefit from several key advantages:
- Less hassle – You don’t have to maintain the apartment building and surrounding property.
- Greater flexibility – You can change apartments much more quickly than you can change homes. Plus, it’s easier to travel if you rent.
- More financial freedom – You don’t have to spend a large lump sum on a down payment or pay property taxes. As a result, you can invest that money in other ways.
Myth 4:
You need perfect credit to buy a home.
Actually you don’t need perfect credit history to get a mortgage—but strong credit does help. A high score can improve your loan approval chances and interest rate. If you don’t have strong credit, all is not lost though. Here are some ways to improve your credit:
- Pay your bills on time
- Don’t max out your credit cards
- Correct any errors on your credit report
- Keep your debt-to-income ratio below 20 percent
