Buying a House vs Renting: the down payment
We could make this complicated but for most home buyers you will need approximately 20% full down payment. As mentioned there are HUD programs, military veteran assisted programs, senior care assisted housing programs and other government assisted housing benefits that may qualify you for a lesser down payment. However, most borrowers will be looking at a 20% down on the mortgage of the total price of the property transaction.
The basic first time home buyer
Ok, if you are like me, have a job, pay taxes, get “some” weekends off and are looking to buy a property you will need the 20% as “collateral interest”. If you do not have 20% down you could spin your wheels trying to get a home mortgage loan for zero down or you can simply save till you have enough. We keep mentioning saving money and that uphill battle is pretty tough unless you have some form of ancillary income coming in. Paying taxes while renting is a triple edged loss as you are not gaining equity, not saving on taxes with owning a home and all the while, shelling out to the landlord. It can seem like a perpetual loop but often renting can be capitalized on when you really need to find the best investment for the long term.
How so? By renting, and finding a reasonably priced rental property you can settle in and wait for the “perfect storm” in which you have saved the 20% down payment, have your credit in order and find a wedge in the local market prices.
Saving up for the house down payment while renting
The basic scale of buying a house vs renting is down to what are you paying now VS what can you afford. Getting a home simply for the sake of owning property might not be the best strategy if funds remain tight. I have given below a real world example of someone who was renting, had bad credit, bankruptcy, whose life situation changed to put them on track in buying a house pretty quick…
Why renting makes sense while in the “holding pattern”
I know one California first time home buyer that rented with an “idea to buy one day” and it worked like a charm! Originally, he had a poor paying job, bad credit, filed bankruptcy and lived in a less than stellar place. Within two years he got a great job, fixed his credit, moved in with a girl that he started saving money with (later to be his wife) and bought a place in Orange County at a fantastic price. They basically saved and waited it out until the best property at the right price “emerged”. They are now happily married and their home valuation price went up almost a third on the original price.
The moral is, you might need help from your family, friends or your future better half, but there is a way to accomplish buying a house in a very short time if you rent and “wait for the best time to buy”. It is impossible to say what the future may hold, but leveraging your time renting with a “goal to buy the right place” can be smarter than rushing to buy any home at all.
We started off with talking about the down payment so also remember: Two people might be able to accommodate not only the 20% down but the whole monthly costs that you alone cant make right now….