Not Ready to Buy a Home? Consider Renting First

Buying a home for the first time is both an exciting and scary experience. On one hand, you get the chance to move into your dream home. On the other, you have to deal with the stress of staying on top of a very demanding checklist to make sure you get the most value for your money. There are many things to consider before deciding to buy a home, which can directly impact your finances, lifestyle, plans for the future, and personal freedom.

Is it a good time to buy a home for you right now? What if you are not ready yet? Maybe you are still saving up for a down payment, not ready to commit to a neighborhood to settle down in, or not confident about your job security. What if paying for a mortgage will bring your budget in the red especially now that rates are at a 23-year high? In these cases, renting a home might be an option that you should consider.

Signs You’re Not Ready to Buy a Home

Many of us dream of buying a home but there are some times when we are just not ready to take the big leap into homeownership. If you are second-guessing whether you’re ready to buy a home, here are some warning signs that you should be on the lookout for: 

Dealing with debt

Buying a house may not be in your best interest if you are still struggling with debt. While having some debt is fine, having too many concurrent student loans, credit card bills, and auto loans might make it almost impossible for you to be approved for a mortgage. Too much debt makes you a high-risk borrower, making lenders more hesitant to move forward with your application. If you do get approved, you will likely be given higher interest rates making your mortgage too expensive.

Low credit score

A low credit score often limits your options when it comes to lenders and mortgages. If this is the case, you should focus on improving your credit score first before making any big financial commitments such as buying a home. There are many ways to boost your score including paying off debt, making your payments on time, and keeping your credit card usage at a minimum. Focus on raising your credit score and before you know it, you’ll be ready to purchase a home in a few years.

Down payment is too high

When purchasing a home, prospective buyers are expected to pay for a down payment, which is a percentage of the sale price upfront. Coming up with enough funds for a down payment can be one of the biggest roadblocks in any buyer’s journey. While many sellers commonly ask for 10% of the home’s sale price, making a down payment for at least 20% of the price is ideal. If your down payment is anything below 20%, you might be required to pay for private mortgage insurance, which protects lenders in case you default on a loan.

Uncertain of what you’re looking for

Since buying a house is a critical decision that can impact your lives, it’s important to know what to look for when buying a home. Looking for a home can be a wildly different experience if you go into it with a pre-set criteria—which could be the difference between finding a home that is right for you or making a mistake. To help you find a home that is the right fit for you, here is list of things you should look for:

• Price. Consider the final sale price of the home. Is it within a range that you’re comfortable with? Remember to take into account the maximum amount you can borrow from a lender as well as how much your downpayment will be. Aside from that, you have to make sure that you have enough savings for home maintenance and any major repairs.
• Neighborhood. As the saying goes: in real estate, everything is location, location, location. You may find a similar home elsewhere but it may come with a steeper price. One of the main factors for this can be its location. Is it in a good neighborhood? Are there good schools nearby? Consider if the higher price is worth the accessibility of your home.
• Type of home. Owning a single-family home often comes with higher upfront costs and more maintenance responsibilities than buying a condo. Townhomes and condominiums tend to be smaller and less expensive, but they come with a catch—it’ll likely cost you more to pay higher homeowners association or condo fees for shared amenities, services and maintenance.
• Overall condition of the home. During your search for a new home, you’ll likely encounter properties that may need minor cosmetic repairs like new paint and carpet. However, there are also some that need significant renovations or require you to replace major costly systems. Do you have the extra cash, time and energy to account for a house that’s not move-in ready? At Imagine Homes, we offer fully renovated homes and make the move in process so easy, all you have to do is come home.

Why Renting is Better Than Buying a Home

Renting a home can have many benefits, especially if you are not ready to settle down or take on the responsibilities of homeownership. Here are some reasons why renting a home first might be a better option for you:

Less expensive than buying

One of the main advantages of renting a home is that it can be cheaper than buying one in the short term.

Renting a home comes with fewer up-front costs and lower monthly payments than purchasing a property. When you rent a home, you only have to pay a security deposit, which is usually equivalent to one month’s rent, and sometimes a broker’s fee, which is usually 10% of the annual rent. When you buy a home, you have to pay a down payment, which is usually 20% of the purchase price, and closing costs, which can range from 2% to 5% of the purchase price. You also have to pay for a home inspection, appraisal, title search, and other fees.

Aside from that, when you rent a home, you only have to pay the rent and the utilities, which are usually fixed and predictable. On the other hand, when you buy a home, you have to pay for a mortgage, property taxes, homeowners insurance, and the homeowners association fees, which can vary depending on the market conditions and the type of property. You also have to pay for the maintenance and repairs of the home, which can be costly and unexpected. According to a report by CNBC in 2022, homeowners spent more than $6,000 on average for repairs.

Gives you more flexibility compared to buying

Renting a home gives you more flexibility. With a single-family rental, you gain the freedom to move whenever your lease ends—making it perfect for you if you are not sure about your future plans or if you want to explore different neighborhoods before settling down. You can also choose from a variety of rental options, such as apartments, condos, townhouses, or single-family homes, depending on your preferences and budget. You can also negotiate the terms of your lease, such as the duration, the rent, and the amenities, with your landlord.

On the other hand, buying a home can limit your mobility and choices. Buying a home means that you are tied to a specific location and property for a long period of time, usually at least five years, to recoup your investment. If you want to move, you have to sell your home, which can be time-consuming and expensive. You also have to deal with the hassle and stress of finding a buyer, negotiating the price, and closing the deal. You also have to pay for the real estate agent’s commission, which is usually 6% of the sale price, and the capital gains tax, which is usually 15% of the profit, if any.

Helps you prepare for when you decide to buy

While renting, you can take this time to prepare for eventually buying your dream home. Renting can give you the opportunity to save money, build credit, and learn about the housing market.

When you rent a home, you can use the money that you would otherwise spend on a down payment, closing costs, and maintenance and repairs to save for a future home purchase. You can also use the money to pay off your debts, such as student loans, credit cards, or car loans, which can improve your credit score and increase your chances of getting a better mortgage rate.

Aside from that, renting a home can teach you about the housing market, such as the trends, the prices, and the demand and supply of different areas and types of properties. You can also learn about the responsibilities and challenges of homeownership, such as the maintenance and repairs, the taxes and insurance, and the homeowners association rules and regulations.

Renting a home first can be a smart way to test the waters and prepare yourself for homeownership, but it is not a permanent solution. Renting a home also has some drawbacks, such as the lack of equity, the lack of control, and the lack of tax benefits. Buying a home, on the other hand, can be a rewarding and profitable investment, as well as a source of stability and pride. Therefore, the decision to rent or buy a home depends on your financial situation, lifestyle, and personal goals. There is no definitive answer to this question, as both options have their pros and cons.

The best thing you can do is to weigh your options carefully and do your research before making a decision. You can use the web search results to find more information and resources on renting and buying a home, such as calculators, guides, and tips. You can also consult with a professional, such as a financial planner, a real estate agent, or a mortgage broker, to get personalized advice and assistance

Experience all of the benefits and advantages of homeownership—in a rental.

Our residents deserve to feel truly at home. Beyond fully-renovated homes, our locations are also second to none. We make it so easy, all you have to do is come home.

Talk to our team—we’d love to know how we can help.

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