For most of the people, moving into the first apartment is a combination of joy and stress which brings a great deal of anxiety. You are sitting on Zillow’s webpage and wonder whether it is possible just to choose a listing and sign the contract. The real estate market is a casino where you always lose. But allow me to help you to figure out what to do financially speaking without using any boring terms applied by bankers.
First of all, you will have to do some math despite your hatred for this subject. A mortgage is only a fraction of your total housing expense because you have to account for the property taxes, insurance and all the other payments related to the property which will attack you sooner or later. Do housing expenses take up over thirty percent of your income? Great! You are doomed because your life is the endless debt prison.
Renting is often considered throwing money into the void, but in reality, you protect yourself from spending the sleepless nights trying to fix the broken heater. You pay for the privilege of watching Netflix without having to fix pipes. Some people pay extra for avoiding dealing with repairs.
Of course, buying a house has its advantages as well. This is a chance to invest in something tangible which you own instead of paying for a right to live in it. An owner cannot raise the rental fee in case he found out something cool and now wants to pay more money on it. This can be quite convenient when there are some economic hard times.
Another crucial thing is the size of your down payment. You are required to make a deposit of three to five percent of the purchase price of the house which seems quite reasonable until you see the sum. In addition to this, there are also some additional costs associated with the closing procedure. If your savings remind of an empty jar, then you know the right answer.
Location is of utmost importance. If you do not intend to stay in the city for five years, buying a home will be a waste of money. The transaction costs are too high and you will not be in one place long enough to compensate them. If you like changing cities, then you should continue renting.
Credit score is another key point. It will determine the interest rates that you have to pay on your loan. So, the bad credit score makes your expenses higher. You should check your credit score, correct any mistakes and pay off all your credit card debts. This is not fun, but you will not regret this.
There are also some hidden expenses related to owning a property that should be considered. The HOA fees can rise suddenly and you will have no money left. There are special assessments which are very painful for your pocket. You will have to have some cash for those things which will fail eventually. If you do not want to do repairs on your own, then renting is your best option.
Finally, please remember that there is no universal choice which will suit everyone. You should carefully analyze your financial position, job stability and how many risks you are ready to take. If you want to have roots and freedom to redecorate everything in your own taste, then go ahead. If you intend to move to Japan after a while, you better keep renting.