Renting vs Buying a house- How to make the right decision

Renting vs Buying a house- How to make the right decision

When thinking about moving you have to make a decision on many things such as where you are going to move, when is it going to happen, how much are you willing to spend, etc. But the hardest decision to make is whether to rent or to buy a house. It is hard because both options have their pros and cons. If you don’t know what they are, you might end up making the decision you regret. And this is a situation you don’t want to find yourself in. So, if you were thinking about whether renting or buying a house is for you, we are here to help you make the right decision based on facts and experience from other people.

Costs of buying a house

Buying a house comes with certain costs that people who haven’t bought real estate before don’t know about.

Earnest money

When you find a house that you like and you contact the seller, to let him know you are seriously interested you will have to give a certain amount of money. Earnest money generally ranges from 1% to 3% of the home’s purchase price. This depends on the local market conditions and the seller’s preference. The money you give is deposited into an escrow account. This money is credited against your closing costs.

Down payment

You will also have to pay a down payment. A down payment is a percentage of the price of the home that you pay upfront at closing. It typically ranges from 3.5% to more than 20% of the purchase price. This depends on many things but your seller will let you know in advance about how big your down payment is. Down payment amount varies based on your credit profile, local market conditions, and the type of mortgage loan you’re approved for.

Home appraisal

This is required by lenders so they make sure that the offer price matches the actual value of the home. This is done before they lend you money. An appraisal costs typically $300 to $500 and it’s paid during or before the appraisal. This is done to avoid any scams.

Home inspection

If you want to make sure you are buying a good home, you want to hire someone who does home inspection. This person is trained to find potential problems and defects that might not be apparent to an inexperienced buyer like yourself. The cost of a home inspector is similar to the appraisal. You don’t want to skip this step if you are seriously thinking about purchasing a home. You will also need a valuation report.

Other closing costs

There are more costs of this type that you will have to pay. You will also need to compensate the seller for taxes paid on the period between the closing date and the end of the current tax period. So, make sure you know some things about the property tax system. When it comes to homeowner insurance, you need to pay the first year’s premium upfront. These insurance costs vary based on the value, style, location, contents of the home, and many other things. Some other closing costs:

  • loan origination charges
  • credit report fee
  • flood certification fee
  • state and local transfer taxes
  • first month’s mortgage interest
  • closing fee.

Special costs

After you go through all of these costs and expenses, you are going to face more of them. Furnishing your new house is one of them. That is of course if the house doesn’t already have furniture inside. But even if it does, you will probably need or want to replace something. You will also have to pay for some minor repairs that might occur while you are moving in. Or you will simply want to change the colors of the walls because you don’t like them very much.

You will also have to pay for moving expenses. Sure, hiring reliable cheap movers from usamovingreviews.com is possible, but it’s still an expense. When you add all these things together, you realize that buying a house is much more than the price of the home. Sadly, not everyone can afford to cover all these expenses and continue living normally.

Renting a house

Renting a house comes with different expenses than buying a house. They are much more affordable, of course.

Security deposit

This is something all landlords require. Security deposit is there to insure against property damage. It’s usually the same amount of money that you will have to continue paying monthly as rent. You will get this money back if when you move, the home is in good condition.

First month’s rent

Even though you have to pay the security deposit you also have to pay first month’s rent. This means that if you pay rent $2000 a month and your security deposit is also $2000, you have to pay $4000 upfront. This is a small price to pay comparing to when it comes to renting a home.

Other costs

You may be charged nonrefundable deposits in addition to your security deposit. This depends on the rental property laws in your state, your living situation, and your landlord’s preferences. One of these is the pet deposit. You will have to pay a certain amount of money if you want to keep a pet in your rented home. This is because pets can damage the property and the landlord doesn’t want to have to pay for the damage your pet made. You will also have moving expenses to cover.

Conclusion

Buying a house comes with many pros and cons even though you will have to pay a very large price. Sure, it’s nice to have something of your own but is it really worth that much trouble? What if you need to move in a few years because of work? What if you end up not liking the location? There are hundreds of things to think about. This is why we believe that for starters, renting is a much better option. It is cheaper and less stressful.

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