It is an age old question for renters across the globe: When does it make sense to stop renting and finally buy a home? Consider four cases in which it may be time to give your landlord notice and claim your very own piece of Philadelphia.
When You Plan to Stay in the Area Long Term
If you’re a person who tends to move from city to city on a whim, buying a house probably isn’t the best idea right now. However if you’ve settled in the Philadelphia area and plan to stay long term (from five years to forever), then investing in a home may be a smart move.
When You Need More Space and Stability
The average row home in Philadelphia comes with two to three floors of space, three or more bedrooms, and a small yard for gatherings. For most, that’s better than a 600-square foot one-floor apartment.
But the decision to buy your own home is not just about more space, it may be about leaving a legacy. No one can predict the direction home values will take, but keep in mind that it takes time, love for your property, and plenty of mortgage payments to gain significant equity in a home. However, when you pay off your home mortgage, your loved ones will have a piece of property in which they can continue to live, maintain, and maybe even pass along in the future. Having a home in your name provides stability in more ways than one.
When Rent Significantly Exceeds Mortgage Payments
Many people find out that the monthly payment on a mortgage is about the same as their rent payment and that alone motivates them to seek home ownership. But you must also consider the additional costs that come with owning a home, such as property taxes, repairs, and even maintaining your yard. When you add up all these potential costs, if the amount of the rent you’re paying still significantly exceeds the cost of buying a home, that is one key indication that it may be time to stop renting and explore the option of buying your own home.
The city of Philadelphia is one place where the cost of renting tends to exceed mortgage payments in many areas, including west and south Philly. Property taxes also tend to stay relatively low (statistics show that median real estate taxes paid in Philadelphia County between 2006 and 2010 was $1,236 compared to the nationwide average of $1,981), so there’s a good chance that the cost of buying a home will be more feasible than continuing to rent.
When You Have the Full Package
When deciding if it is time to stop renting and buy a home, another major motivator is having “the full package,” which will allow you to get a desirable mortgage rate. The full package is having a secure job, solid credit, a total debt-to-income ratio of under 36 percent (this is also called your back-end ratio), and enough money saved to cover your down payment.
The decision to stop renting and finally purchase your own home is not one to be taken lightly. Take full inventory of your current financial and life situation and then factor in the lifestyle you desire and your plans for the future.