Try and contain your excitement over my clever title today. I typically love to use a play on words or an alliteration, but today I just wasn't feeling it. I'm still (casually) house-hunting and honestly enjoying the process. In the past decade or so, when looking for a place to rent, I spent loads of time on the interwebs seeking out rentals. The home shopping process has been literally the same. I'm spending time researching neighborhoods and homes and eventually I'll work up to actually visiting the home ... you know ... like a real human meeting with other humans. Hard to believe, I know. Can we stop wearing hazmat suits to the grocery store yet? Ugh.
If you're still debating whether to rent or buy, this article is for you. If you are not in this boat, I suppose you can turn the page, take another sip of your coffee and enjoy one of the other cool articles in this paper. I mean, you'll miss out on some additional funny commentary, but you've got a life to live. You do you. For the rest of you, this is not always a simple question to answer. We'll talk about some of the items you should be considering as you make your choice. It really comes down to your "5-year plan" and how much pizza and beer money you have saved over the last couple years. Let's get going.
Since I mentioned the "m" word, let's talk about your financial situation. Honestly there's a pretty big pile of things that you should have lined up before you can purchase a home. The fastest way to find out is to head on over to your local bank and have a sit-down with one of their mortgage specialists. Don't get me wrong, there's a million banks out there, all with different fancy names and functions. But at the end of the day, having a quick chat with your local bank can at least give you a bird's eye view of where you stand financially and give you some questions to ponder on your way up into the mountains this weekend.
The lender is going to expect you to have a stable job with a bit of history behind you. This simply tells the bank you can get and keep an income producing relationship with an established business. No real surprises there. And they're going to be looking into your credit history, so in hindsight, the purchase of that pinball machine and battle-used samurai sword are not going to help you one bit. But all is not lost. Keep reading.
If you are fortunate (smart?) enough to have saved up enough money for a down payment, pat yourself on the back and reward yourself with a new pinball machine. No, wait. Don't do that. Just be happy you have a pile of cash. We're generally talking about 3% for first time home buyers for the down payment and there's an added amount for closing costs as well. But don't count on those numbers. Everyone's situation is different, so again, the conversation with the lender will help out immensely. "I encourage all prospective buyers to get that lender visit taken care of as their first step towards home ownership," notes Badger Realty agent, Amy Rogers. "It establishes a more clear sense of reality with regards to what they can afford and how much 'real money' outlay they will need to have in hand," she continued.
Amy is right. If you're leaning towards home ownership instead of renting, the credit check, job stability and some semblance of a pile of cash are all going to be critical to the success of your buying adventure. The advantage of renting, in this specific, financial area, is that almost none of that stuff applies. Sure, your landlord is going to want to see a steady job and will even ask for some references. But aside from paying first month's rent and maybe a deposit on the propane account, the initial outlay is quite minimal in comparison. Right off the bat, if you're sitting on a questionable financial history, a spotty work history, and a bank account balance akin to Charlie Bucket (before he found the golden ticket), you're staring another couple years of renting right in the face. And that's perfectly fine.
Moving away from the financial side of things is a move back towards your 5-year plan. Do you love it here? Do you have kids in school? Are you itching for warmer weather? Do you want oceans or mountains? There's a lot to think about when you are deciding to rent or buy. Renting is relatively quick and painless. Moving around is almost without penalty and the flexibility of rental terms is pretty wide open. On the other side, buying and selling a home is more involved (and expensive) and should not be taken lightly. If your 5-year plan involves staying right where you are and building a "life," then you should be seriously considering a home purchase. It brings with it loads of benefits which we'll save for another article.
The last item for today is maintenance and renovations. If your idea of remodeling is the fist you put through the wall of your college dorm room, perhaps renting is not for you. Landlords tend to frown on unauthorized "renovations" and you will end up paying for the fix. On the bright side, your landlord is handling the plowing and mowing so you can enjoy that benefit. For homeowners, while you will be responsible for maintaining the property, the freedom to paint, tear down walls, even punch holes in the walls is all yours. Let your freak flag fly.
I love the idea of painting rooms, remodeling bathrooms, working on landscaping projects and generally making my home something that makes me smile when I drive in the driveway or walk through the halls. For me, there's no substitute for owning your own home and I'm anxious to get back in the "owners" column. If the timing is not right for you and your bank account has more dust bunnies than greenbacks, start saving now and you'll be shopping for your home in no time.