Rent vs. Own: How to Choose
Homeownership is often referred to as “The American Dream.” And there are certainly many advantages to homeownership, not the least of which is that real estate is nearly always a wise investment. Homeownership is also desirable thanks to the feeling of security it brings and control over one’s property. When you own, the increased value of the real estate is money in your pocket, not the landlord’s. And your monthly rate is locked in (except for increases in taxes and insurance if they are factored into the monthly payment on the mortgage.) Whereas landlords can raise the amount they charge you, usually annually when the lease renews.
Renting definitely has its own advantages, of course. Homeownership means being responsible for all the repairs a home needs over time. Those costs can be extremely expensive, especially if it’s replacing HVAC systems or a roof. Renters can also move to another city, state, or country on short notice if opportunities arise for career advancement without having to wait until their property sells.
Whether you’re renting or buying, it’s a good idea to clean the home thoroughly before moving in, so reach out to Riley’s Carpet Cleaning to save you time and to make sure the job is done thoroughly.
Mortgage Hurdles
When your employment status is of the more traditional sort, meaning you are employed by a company that compensates you with an hourly or salaried paycheck, it’s easier to obtain a mortgage. Most lenders want to see at minimum a two-year work history with the same employer. If you’ve moved laterally, that is, to a different company doing the same work for more money, that will be something a lender will take into consideration. An erratic work history, however, can reflect negatively on your status of being a good candidate for a mortgage.
If you’re self-employed, the two-year rule applies too, but this comes with a few obstacles those who are not self-employed have to contend with. You’ll need to furnish two years’ worth of accounts prepared by your accountant. Self-employed people will probably also need to secure a larger down payment and show evidence of future income. If you’re newly self-employed, you’ll probably have to hang in there for two years before trying to obtain a mortgage because, though your business may show a lot of potential, lenders look at past income, not future. Blue Water Mortgage Corporation notes that you can, however, get an offer letter if you’re about to start a new job.
If you’re currently employed with a company and can show two years of steady income, it’s best to apply for the mortgage now or when that two-year mark occurs. Your dream of self-employment may have to wait until you’ve secured the loan and are comfortable knowing your later self-employed income will be enough to repay the loan.
What Comes with Owning, Including a Home Warranty
In addition to paying for a mortgage, homeowners insurance, and property taxes, the maintenance of a home comes with its fair share of costs. And major repairs in the first year can set you back if you aren’t prepared. The best choice? A home warranty. But does the cost of a home warranty pencil out? Well, imagine having your HVAC system wear out. According to Modernize, “the average HVAC replacement cost is $3,250 to $12,586, which would include installation of both a new central AC unit and gas furnace combo.” Ouch, right? This is when a home warranty comes to your rescue. With coverage that extends to HVAC repair and replacement, you’ll only be out your initial home warranty payment instead of paying thousands of dollars.
When Renting Makes Sense
Renting can be far more desirable for the self-employed for a variety of reasons. The first is, of course, no unexpected home repairs to contend with that could seriously hamper the ability to get a start-up going or go into increased marketing or production. Apartment List points out that some of the amenities that go with renting in an apartment complex include the availability to use conference rooms or business offices, which means access to printers, scanners, and fax machines. Utility and insurance costs are also far less when renting, allowing the self-employed to invest that money into their businesses.
The pros and cons of both renting and home owning is a list everyone should make for themselves, whether self-employed or receiving a salary. Much of it may even come down to other factors such as the desire to try living in new places, or the prospect of having to move in the near future to live closer to aging parents. With so many factors, it may be a good idea to consider getting a home warranty and speak to a mortgage professional before making any decisions.
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