It’s hard to know sometimes who to believe when it comes to real estate. Listen to one expert and he recommends buying property now because of the low interest rates and rising values. Listen to another and she says to hold off because the dearth of inventory makes it a sellers market.
No less a rental authority than Apartment Therapy avoids the question of unpredictable timing by taking a different tack. It recommends that you look at the following signs that it’s time to stop renting and start buying.
You’ve fixed up your finances.
You’re financial house must be in order before you consider buying a physical one. You must be out of debt enough that your credit score is excellent. Everything from your interest rate, payment terms, and whether you actually qualify for a loan depends on a good number. (To find out what your credit score is for free, go to Credit Karma.) You should also have an emergency fund saved up equaling about three to six months of your salary, which you can use to pay the mortgage in case you encounter unexpected money problems.
You’ve saved up a down payment.
If you manage to put down 20 percent of the purchase price, you avoid all kinds of fees, such as Mortgage Insurance. However, that may take too much of your cash flow. A 3.5 percent down payment means you don’t have to save us much but may burden you with too high a monthly payment. About 5 – 10 percent is ideal, if you’re looking for a fixed-rate conventional loan.
You’ve outgrown your apartment.
Your studio apartment was fine when you lived by yourself. But now that you have a spouse and twins on the way, the place is proving to be too small. You really want a three-bedroom unit but such rentals are difficult to fine and cost more than the mortgage on a house. In addition, you really want to decorate the interior with your unique sense of personal style and no landlord is going to tolerate your unusual wall color selections. Even in a condo or planned community, you’ll be able to decorate or modify the interior into what every you find most appealing.
Buying is a better deal.
In many area of the Central Valley, current market conditions make buying right now is a better deal than renting. Real-estate authority Zillow helps with the rent versus buy decision with its metric called the Breakeven Horizon. This represents the number of years after which buying makes more financial sense than renting. It compares the total expenses of a home including property taxes, tax benefits, and home appreciation rates against the current rental rate and predicted rental appreciation rate. It also takes into account inflation rates and opportunity costs, or how you’d earn money if you invested it in a financial asset with a stable return.
•In Visalia, the breakeven horizon runs only 1.5 years.
•In Tulare and Corcoran, it’s 1.2 years.
•In Hanford, it’s 2.2 years and in Lemoore, it’s 2.4 years.
You’re Staying for A While.
Maybe you’ve just been promoted at your job, your kids have just started school, or you just like living in the Central Valley. In any case, you want to stick around for a while, or maybe, forever. Rather than throwing your cash away on rent every month, it makes more sense to invest your cash in an appreciating asset that you may either be able to sell for a profit later or pass on to your kids.