Mortgage 101: Why Buying a Home May Make More Sense than Renting

Since the housing crisis in 2008, an increasing number of people have opted to rent than buy a home, even when purchasing a home makes more sense.

During the housing crisis and Great Recession, many people put their dreams of homeownership aside because of fears of foreclosure and other financial insecurities. As demand for rental units increases, the monthly rental payments have followed suit. According to Realtor Magazine, the cost of renting a home in the United States has risen by nine percent, which local markets have seen more drastic increases during the past decade. For example, in the New York/ New Jersey market, renters can spend 42 percent or more of their monthly income for rent. If a renter has a secure job and plans to stay in the area for five or more years, it may make more sense to buy a home.

Advantages of Securing a Mortgage to Buy a Home in the Current Market

Since, in most cases, the maximum housing debt to income ratio is around 33 percent, purchasing a home may make more sense than renting, especially if you are eligible for a VA or USDA home loan, which does not require a down payment. When you use a fixed rate mortgage, you know the amount of your monthly housing payment is fixed for the long term, which is not the case when you rent. In addition, you have the advantage of building equity in your home.

To learn more about home financing and discover if you are ready to make the transition from renter to homeowner, contact a local mortgage broker to review your situation.