Should You Buy or Rent? 6 Factors to Help You Decide

Did you know that buying a house is currently 38 percent cheaper than renting?

Springtime is moving time for many of us.

Whether you are heading to Overland Park, Kansas, which is Livability’s number one city for families, or Cambridge, Massachusetts, Forbes top destination for Millennials, you will need to decide between renting and buying.

When its time to move, one of the biggest decisions you will be faced with is whether to rent or buy your new place. Buying or renting can be a difficult decision and there are a number of factors that should be considered before making a move.

According to nationwide statistics from Trulia, buying a house is currently 38 percent cheaper than renting. The price differences vary greatly, in some cities the difference can be as low as 5 percent while in others it is over 65 percent.

So should you rent or buy? In the end, deciding whether to rent or buy is a personal choice but considering these questions before you pull the trigger on a rental agreement or a mortgage can help you make the best decision for your particular situation.

How long are you staying?

How long you plan on staying in a certain location or house is an important consideration when deciding between renting and buying. If you are planning on making Holland, Michigan, which came in as the number three best city for families, your permanent home, buying is usually the best bet, while if it’s a short-term deal, renting is ideal.

Buying and selling a house takes both time and money so if you are planning on staying for less than five years in a location, renting may make more sense.

While housing is booming now, if the market turns, it can become extremely difficult to sell a house, forcing you to stay longer in the same location. On the other hand, if you are confident in the market, buying a house could result in a quick profit if you sell a few years later at a higher price.

How stable is your life?

How stable is your job, your family or love life? Do you have any reason to believe that you will be relocating in the near future? If your job is anything less than rock solid, renting is probably a good idea until you are on more solid footing.

Purchasing a home requires time and money that will be wasted if you have to move in a year or two due to relocation for work.

Not being able to afford a mortgage payment due to a lost job can not only result in the loss of your house, it may also affect your ability to get a mortgage in the future.

If you feel good about your job and love life and see yourself staying in the same place for quite awhile, purchasing a home is usually the best path.

Is your down payment in order?

While it is possible to buy a house with a small down payment, especially for first time homebuyers, in a competitive market a smaller down payment can make your offer less appealing if a loan approval is one of your contingencies.

Having a 20 percent down payment will also mean that you can pass on private mortgage insurance (PMI) which your lender will require without a standard down payment. PMI can run 1 to 2 percent of your loan value, making it a significant expense.

In many cases, it makes more financial sense to rent until you have a 20 percent down payment.

Do you have a contingency fund?

Homeowners don’t have a landlord to call when something goes wrong, and there will always be plenty of things that can go wrong. Furnaces stop working, water pipes freeze or it may be necessary to cut down a dying tree.

All of these issues can be expensive, making a contingency fund a necessity. While insurance may cover some of these issues, making a claim will push up the cost of your coverage. Most experts recommend paying smaller claims out of pocket and saving your homeowners insurance for major damage.

It’s a good idea to have at least a few thousand dollars in savings to cover any unexpected expenses that pop up before signing on the dotted line to close on a house.

Can you afford it?

It’s not just the mortgage that you have to take into account when calculating the cost of buying a house. Insurance, property taxes, HOA fees, and all of the utility bills will fall to you. These expenses can dramatically impact your monthly budget.

Do a realistic budget and include all expenses that you will incur as a homeowner and make sure that you can easily afford it. Compare these costs with a rental budget and decide which option fits into your budget best.

Where to Move

Not sure where you are headed? Check out these highly rated towns which made the top five in Livability’s Best Places for Families:

5. Leesburg, VA: Leesburg has a low crime rate, combined with great schools and affordable housing. Beautiful scenery and tons of outdoor activities make this a great place to call home.

4. Carmel, IN: Carmel is bursting at the seams with recreational activities and the percentage of kids in town is roughly 13 percent higher than most cities so your children will have plenty of other children to play with. Trails, wetlands and dozens of parks make this town a great location for families.

3. Holland, MI: Rounding out the top three is Holland, which has an authentic windmill, plenty of Dutch bakeries and beautiful beaches, making this a lovely place to raise a family. In addition, it has a low crime rate, a great school district and plenty of job opportunities.

2. Plano, TX: The number two spot belongs to Plano, which has one of the highest rates of high school graduation in the country. Hiking trails, the Plano Aquatic Center and tons of restaurants and shops make it a great place for the whole family.

1. Overland Park, KS: The top spot was taken by Overland Park which has very highly rated schools, affordable housing and a huge soccer complex make this town one of the family friendliest places in the country.