The obligatory question that the majority of renters are faced every year is whether or not they should rent or buy a home. Excessive 30 year home mortgages have been a thing of the past. Generations now are not interested in taking on such a large debt so early in their lives. Add to that the fact that home rentals have been a popular option for millennials and baby boomer generations as they are not forced to be planted in a single location all the time.
So, what should you do? Should you continue renting in one of the hottest real estate markets? Or take the plunge? Let’s take a look.
The Reality of Closing Costs
Depending on where you live closing costs can be exceedingly high. You will need to have your credit checked, lenders will charge a loan origination fee for processing loan paperwork and there may be attorney’s fees. In addition to all of that you will also incur inspection costs, appraisal fees, survey fees, title insurance and title search fees. But that’s not all, there are also: pest inspection fees, recording fees (paid to the county to record your deed) and underwriting fees paid to the lender to evaluate your loan application – all of which fall under the heading of closing costs. These usually total approximately 2.5 to 5 percent of the purchase price of the property.
Just like everything else your newly purchased home will be taxed. This cannot be avoided.
The unfortunate reality of this is that these many hidden costs of buying a home add up – to a lot of money. If you and your spouse are not financially comfortable in taking on this debt, then renting a home is a great solution. Renting a home requires far less paperwork and headache – as long as your landlord is professional and timely.
At the same time, if you are comfortable taking on that debt and you are sure of where you will want to be in almost 4 years time then buying a home can be a financially sound decision.