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Renting vs Homeownership

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creditstalker
Frequent Contributor

Renting vs Homeownership

I will be on the market to purchase a home hopefully by the end of the year.   I moved out of a 5 bedroom house that I was leasing for 1500.00 per month to a 2 bedroom apartment that I pay 874.00 per month.  I have kids, but we have been able to make the space work for us but I'm not sure how long it will last.  

 

I have been able to tackle alot of credit issues since downsizing.  However,  my friend suggest that I should live in the apartment for another two years before buying so that I won't be house poor. 

 

I know that is good advice, but is the market that bad where I would need that much cash flow in order to maintain a home, (he is suggesting that I save 15-20% as a down payment)  I dont to finance no more than 145k,  and I have a salary a little over 60k with debt totaling 700 per month.  (harley & car note)

 

Will it be better to live in the apartment for two more years than actually buying a home?  I always was under the impression that buying was better than renting....

 

Your thoughts?

Current FICO 08 as of 06/01/2015 TU 648 EQ 624 EX 602
FICO Mortgage Scores TU 594 EQ 540 EX 642

Message 1 of 17
16 REPLIES 16
Anonymous
Not applicable

Re: Renting vs Homeownership

There are many factors that play into this decision, but if you are financially able, owning is the way to go. If you are looking around $145,000, you should easily qualify in regards to debt-to-income ratios! Now is a good time to buy considering rates are the lowest they have been since 2013, and home prices are steadily on the rise.

 

In my opinion, there are three huge benefits to homeownership beyond pride as long as you buy within your means (which you would definitely be doing):

 

1. Price will never increase if you don't refinance (rent increases approx. 3% per year)

2. Every payment builds equity (paying yourself vs. your landlord)

3. Tax deductions (get to deduct all yearly interest paid in most situations)

 

 

What does your credit score look like? Any major derogatory items? How much do you have available in cash towards downpayment/closing costs?

 

 

Message 2 of 17
creditstalker
Frequent Contributor

Re: Renting vs Homeownership

My current scores are:

 

Equifax 535

Transunion 580

Experian 559

 

Navient will be removing (6) 150 day lates and (3) 120 day lates on my student loan accounts.  I paid all collections off and a few will be deleting them from my report, and made arrangements with one, and I paid off all credit cards.  

 

My current scores have not been updated with these changes yet....

 

Below is what my report will look like after all updates have been posted.

 

All of my school loans are NOT in payment status...they are deferred because I am in school.  I do not plan on getting anymore loans.

 

Kay Jewelers

 

8/2013

$0

Paid or paying as agreed

 

(1) 30day late 09/2014

Navy Federal Cr Un

 

6/2013

$0

Paid or paying as agreed

No

Paid OFF

Navy Federal Cr Un

 

6/2013

$0

Paid or paying as agreed

No

Paid OFF

Capital Bank

 

5/2013

$0

Charged off as bad debt

 

Paid OFF  / charged off in 2014

Navy Federal Cr Un

 

6/2013

$0

Paid or paying as agreed

 

(1)   30day Late 08/2014

Bank Of America

 

2/2009

$0

Paid or paying as agreed

 

(1)   30day & (2) 60day in 2009

Transtar Federal Credit

 

3/2009

$0

Paid or paying as agreed

 

(1)   30day Late in 2010

Transtar Federal Credit

 

3/2009

$0

Paid or paying as agreed

No

 

Houston Highway Cu

 

5/2012

$1,997

Charged off as bad debt

 

Payment Arrangements $60.00 per month Charged off in 2014

Navient

 

8/2007

$6,512

Paid or paying as agreed

No

 

Navient

 

9/2004

$4,576

Paid or paying as agreed

No

 removed 150 day late in 2011

Navient

 

8/2007

$4,096

Paid or paying as agreed

No

 removed 150 day late in 2011

Dept Of Ed/Navient

 

10/2009

$3,820

Paid or paying as agreed

No

 removed 150 day late in 2011

Navient

 

9/2004

$3,101

Paid or paying as agreed

No

 removed 150 day late in 2011

Dept Of Ed/Navient

 

9/2010

$3,094

Paid or paying as agreed

No

 removed 150 day late in 2011

Dept Of Ed/Navient

 

8/2008

$3,041

Paid or paying as agreed

No

 removed 150 day late in 2011

Navient

 

8/2005

$2,167

Paid or paying as agreed

No

 removed 120 day late in 2012

Dept Of Ed/Navient

 

9/2010

$1,878

Paid or paying as agreed

No

 removed 120 day late in 2012

Navient

 

8/2005

$1,551

Paid or paying as agreed

No

 removed 120 day late in 2012

Dept Of Ed/Navient

 

9/2008

$1,513

Paid or paying as agreed

No

 

Dept Of Ed / Nelnet

 

10/2009

$0

Paid or paying as agreed

No

 

Student Loan Finance Ass

 

10/2009

$0

Paid or paying as agreed

No

 

 

 

 

 

 

 

 

Webbank/Freshstart

 

4/2013

$0

Paid or paying as agreed

No

 

Harley Davidson Credit

 

9/2014

$17,836

Paid or paying as agreed

No

 431.00 per month

Houston Highway Cu

 

9/2013

$4,893

Paid or paying as agreed

No

 173.00 per month

Harley Davidson Credit

 

5/2014

$0

Paid or paying as agreed

No

 

Houston Highway Cu

 

2/2011

$0

Paid or paying as agreed

No

 

Houston Highway Cu

 

3/2011

$0

Paid or paying as agreed

No

 

 

 

Current FICO 08 as of 06/01/2015 TU 648 EQ 624 EX 602
FICO Mortgage Scores TU 594 EQ 540 EX 642

Message 3 of 17
ezdriver
Senior Contributor

Re: Renting vs Homeownership

Buying vs renting is a personal decision so only your feelings matter.

 

As an aside, is your friend a renter?

 

 

Message 4 of 17
creditstalker
Frequent Contributor

Re: Renting vs Homeownership

@

 

My friend is an investor he owned 10 houses at one point, but only has 3 now.   I think he doesn't want me making the same mistakes that he did,  but this will be my only residence....

Current FICO 08 as of 06/01/2015 TU 648 EQ 624 EX 602
FICO Mortgage Scores TU 594 EQ 540 EX 642

Message 5 of 17
StartingOver10
Moderator Emerita

Re: Renting vs Homeownership

Buying for a primary residence is completely different than buying several homes for investment purposes.

 

Now that FHA has substantially reduced the PMI percentage, FHA becomes a viable loan product for first time homebuyers again.

AND, if you can manage to put down 10% on a FHA loan rather than 3.5%, your MIP will drop off after 11 years without having to refinance. That is a very big deal because rates are very low right now.  Otherwise it stays for the life of the loan.  You may be able to negotiate a seller contribution to pay towards your closing costs - I am able to do it with my clients frequently, but not 100% of the time. This way the funds you have set aside for closing costs can be applied toward additional down payment.

 

Looking at your scores, it woud be beneficial for you to visit the rebuilding forum to see what you can do to get your score above 620 if possible. The changes you have made hopefully will help go a long way toward that 620 min mortgage score goal. 

Message 6 of 17
ezdriver
Senior Contributor

Re: Renting vs Homeownership

It figures. Investor buyers promoting renting. I am shocked!

Message 7 of 17
creditstalker
Frequent Contributor

Re: Renting vs Homeownership

I hope after all of the updates I will see a huge increase.

Current FICO 08 as of 06/01/2015 TU 648 EQ 624 EX 602
FICO Mortgage Scores TU 594 EQ 540 EX 642

Message 8 of 17
creditstalker
Frequent Contributor

Re: Renting vs Homeownership

He states that I would be buying time in order to save more money since my rent is cheap in the apartment.  Also, that I would be coming out of pocket money for repairs and or upgrades that I may need when I purchase.

Current FICO 08 as of 06/01/2015 TU 648 EQ 624 EX 602
FICO Mortgage Scores TU 594 EQ 540 EX 642

Message 9 of 17
StartingOver10
Moderator Emerita

Re: Renting vs Homeownership


@creditstalker wrote:

He states that I would be buying time in order to save more money since my rent is cheap in the apartment.  Also, that I would be coming out of pocket money for repairs and or upgrades that I may need when I purchase.


Is this investor friend of yours also your landlord?

 

Yes, when you own a home you have to pay for maintenance and upgrades - that actually is part of the pleasure of owning your own home (putting in upgrades). As to maintenance, it is a normal part of homeownership and at least you have control over the costs. Not like dealing with a landlord that may or may not want to spend maintenance funds on your apartment.

 

Only you can answer this question because it has a lot to do with your own desire for owning rather than being at the mercy of unknown rental costs over the next couple of years. In my market, the rents are high and going up.

Message 10 of 17
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