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How to Determine Whether or Not You Should Buy or Rent?

The decision of whether to rent or buy is a big one that can be hard to parse, especially if you’re not familiar with the area.  Although it can be tempting to buy your first home and get that part of your life started, if you don’t plan, you could be setting yourself up for a lot of financial debt.

Here are the top things to think about before you try to buy a home.

How Much do You Make in a Year?

When you look at your income versus the price of a home in your area, is it enough to be able to pay off a house in ten or thirty years?  If your house payment is 1,2000 dollars a month, you should have an income of at least four times that to be comfortable.  The better your income is, the more likely you’ll be able to afford your house payments.  If your income is meager, you’re probably better off renting for now.

Is Your Income Reliable?

Can you guarantee that you’ll be paid a set amount of dollars on a regular schedule, or is your income less predictable?  If it’s not predictable, you may have to have a larger down payment, or you may have to find a predictable source of income until you can build to the point that it’s no longer a problem. On the other hand, if you have an unpredictable income, but your partner’s is more stable, they may be able to ensure that the two of you still get the loan.

Do You Have Any Savings?

How good is your savings history?  Do you have a good amount of money saved up, or are you more inclined to spending and living paycheck to paycheck?  Although apartments for rent in Chicago don’t check your savings history, a lender will look at your account and see if your spending habits are healthy.  If they notice that you rarely have any money left in your account a couple of days after payday, they may see you as a high-risk loan.  Luckily this is a habit you can work on and improve with.

What’s Your Credit Score Look Like?

How high is your credit score?  Anything above 650 is acceptable, but you should generally aim to be in the 700 or higher range to buy a home.  If you need to take a year or two to build your credit, you can continue renting during this time so that it’s easier for you to stay in an apartment and wait it out.  The fastest way to build your credit is to pay down any loans and ensure that you’re making regular payments on your credit cards with low utilization.

Apartment living isn’t the worst situation to be in!  Not only is renting handy because you don’t have to pay for repairs or updates, but it also means that you only have to live there for a year or so at most. So take your time, ensure you’re entirely ready before you buy a house: and then pounce.

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Red Note: 30 September 2022

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