Beautiful Virgin Islands

Friday, Aug 08, 2025

Should you rent or buy a home? Ask yourself these 3 questions

Should you rent or buy a home? Ask yourself these 3 questions

Deciding whether to rent or buy a home can have you talking yourself into financial circles.

"Take advantage of low mortgage rates and build equity!," your "buy" brain says. "Have flexibility and keep your costs of getting in and out low!," your "rent" side says.

Ultimately, the decision comes down to your financial fitness, how long you plan to live in the home and what your cash flow looks like.

While the number of home purchases reached a 14-year high in 2020, prices also went up considerably. Meanwhile, with so many people leaving major cities, landlords have been left in the lurch, and that has translated into some attractive rental deals.

Ask yourself these three questions to find out whether renting or buying makes more sense for you.

1. Are you financially fit?


The first step is to figure out if buying is even an option.

The decision between renting or buying is less about home prices or rents and more about whether you're ready to be a homeowner. What does your savings look like after a down payment is taken out? What is your credit score?

Andrew Dressel, a financial planner with Abundo Wealth in Minneapolis, likes people to have six months of expenses saved up in an emergency fund, $10,000 in cash to cover closing costs and moving expenses, and a credit score of 720 or higher.

"The emergency savings is of high importance and the 720 credit score has more wiggle room," he said.

In addition, the overall cost of owning the home, including the mortgage and utilities, taxes, maintenance of appliances and the yard and the expense of everyday wear and tear should not exceed 40% of a person's take home pay, he said.

"They need to also make sure they are not sacrificing their retirement or other goals just to own a home right now," Dressel said.

Leo Marte, a certified financial planner with Abundant Advisors in Charlotte, North Carolina, said people should also strive to be debt-free before buying a home.

"If you are not financially ready, paying rent is essentially buying patience and insurance against homeownership costs," he said.

2. How long will you live there?


If you only plan to live somewhere for two or three years, experts recommend renting. Especially now.

"If you are in a city and need to stay there, now is a great time to continue to rent and get more for your money," said Jay Abolofia, a certified financial planner with Lyon Financial. "People are able to rent in the city for dramatically less because other people have fled and landlords have had to drop their rents."

If you're feeling overwhelmed or rushed by purchasing in some hectic markets with low inventory, he said, renting is not a bad place to land, if it's only for a year or so.

He dismissed the sense of urgency many potential buyers are feeling to lock in mortgage rates at their current record lows, saying that interest rates and home prices often have an inverse relationship.

"When interest rates are lower, that puts upward pressure on housing prices," he said. "Just because interest rates are low doesn't mean it is a good time to buy and higher interest rates doesn't mean it is a bad time to buy a home."

But, Abolofia said, it is always a good time to buy if you're planning on staying there for a while.

"The longer you're going to stay, the more it makes sense to buy," he said.

Once you've determined your estimated time in this home, cross check yourself by asking if you're being too conservative about how much house you should buy, said Leonard Steinberg, an agent at Compass in New York.

"You should be conservative enough that you can sleep at night and eat," said Steinberg. "But many people are too conservative."

He said he often sees people buy homes that are too small and, after a few years, they realize the space isn't working for them.

"Now they have the costs of selling and buying again," he said, which includes closing costs, inspections, appraisals and realtor's commissions. "Moving a lot is expensive."

3. What are your monthly payments?


There is a certain amount of money you will need to buy a home, complete the transaction and maintain it, and there is no sense in rushing into homeownership before you can comfortably cover those costs.

"If you can afford the mortgage on a monthly basis, can maintain an adequate emergency reserve and are at the right point in life, go ahead and buy," said Noah Damsky, a chartered financial analyst with Marina Wealth Advisors in Los Angeles. But, he says, do the math first.

Damsky recommends that your monthly mortgage payment should not exceed 35% of your gross income. But that is the upper end. Other models are more conservative and suggest 25%, in order to keep your debt-to-income ratio lower. A middle-ground recommendation says you shouldn't put more than 28% of your monthly gross income toward your mortgage payment.

Also consider what you can afford upfront.

While traditionally buyers are encouraged to purchase a home with a 20% down payment, Damsky said, it could be advantageous to accept a larger mortgage balance with a lower down payment since mortgage rates are currently below 3%.

"I encourage clients with less than a 20% down payment to purchase a home if they can obtain mortgage insurance at less than 0.2% per year and can maintain six months of emergency reserves after the purchase," said Damsky.

And while some potential buyers may look forward to the tax benefits of homeownership -- including deducting mortgage interest, property tax payments and other expenses from their federal income tax bill -- Damsky cautions not to go overboard.

"I try to temper their expectations by explaining that the tax benefits will often be substantially offset by a roughly 1% annual maintenance cost."

And they should be warned: The out-of-pocket costs of caring for a home could be even more, said Matt Hylland, a financial planner at Arnold and Mote Wealth Management in Cedar Rapids, Iowa. He advises homebuyers to budget 2% to 3% of the home's value to cover upkeep and maintenance.

"Making sure you find a monthly payment that you can afford is important," said Hylland. "But don't forget to add to that other expenses you will face as a homeowner."

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Trump Administration Increases Reward for Arrest of Venezuelan President Maduro to Fifty Million Dollars
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
OpenAI Launches GPT‑5, Its Most Advanced AI Model Yet
Embarrassment in Britain: Homelessness Minister Evicted Tenants and Forced to Resign
President Trump nominated Stephen Miran, his top economic adviser and a critic of the Federal Reserve, to temporarily fill an open Fed seat
The AI-Powered Education Revolution: Market Potential and Transformative Impact
Chikungunya Virus Outbreak in Southern China: Over 7,000 Hospitalized
French wine makers have seen catastrophic damage to vines that were almost ready to be harvested after the worst fires in more than 70 years burned through the south of the country
US Lawmaker Probes Intel CEO’s China Ties Amid National Security Concerns
Brazilian President Lula says he’ll contact the leaders of BRICS states to propose a unified response to U.S. tariffs
Trump Open to Meeting Putin as Soon as Next Week, with Possible Trilateral Summit Including Zelenskiy
Katy Perry and Justin Trudeau spark dating rumors, joining high stakes world of celeb-politician romances
US envoy Steve Witkoff arrived in Moscow to seek a breakthrough in the Ukraine war ahead of President Trump’s peace deadline
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Nine people have been hospitalized and dozens of salmonella cases have been reported after an outbreak of infections linked to certain brands of pistachios and pistachio-containing products, according to the Public Health Agency of Canada
Karol Nawrocki Inaugurated as Poland’s President, Setting Stage for Clash with Tusk Government
Trump Signals JD Vance as ‘Most Likely’ MAGA Successor for 2028
US Charges Two Chinese Nationals for Illegal Nvidia AI Chip Exports
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
U.S. Tariff Policy Triggers Market Volatility Amid Growing Global Trade Tensions
Tariffs, AI, and the Shifting U.S. Macro Landscape: Navigating a New Economic Regime
Representative Greene Urges H-1B Visa Cuts Amid U.S.-India Trade Tensions
U.S. House Committee Subpoenas Clintons and Senior Officials in Epstein Investigation
Sydney Sweeney Registered as Republican as Controversial American Eagle Ad Sparks Debate
Trump Accuses Major Banks of Politically Motivated Account Denials and Prepares Executive Order
TikTok Removes Huda Kattan Video Over Anti-Israel Conspiracy Claims
Trump Threatens Tariffs on India Over Russian Oil Imports
German Finance Minister Criticizes Trump’s Attacks on Institutions
U.S. Proposes Visa Bond of Up to $15,000 for Some Applicants
U.S. Farmers Increase Lobbying Amid Immigration Crackdown
Elon Musk Receives $23.7 Billion Tesla Stock Award
Texas House Paralyzed After Democrats Walk Out Over Redistricting
Mexican Cartels Complicate Sheinbaum’s U.S. Security Talks
Mark Zuckerberg Declares War on the iPhone
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
Tesla Seeks Shareholder Approval for $29 Billion Compensation Package for Elon Musk
Nvidia is cutting prices on its RTX 50-series graphics cards after sales slowed and inventories piled up
Ghislaine Maxwell Transferred to Minimum-Security Prison Amid Ongoing DOJ Discussions
U.S. Tariffs Surge to Highest Levels in Nearly a Century Under Second Trump Term
Matt Taibbi Slams Media for Role in Russiagate Narrative
Pilots Call for Mental Health Support Without Stigma
All Five Trapped Miners Found Dead After El Teniente Mine Collapse
Ong Beng Seng Pleads Guilty in Corruption Case Linked to Former Singapore Transport Minister
BP’s Largest Oil and Gas Find in 25 Years Uncovered Offshore Brazil
Italy Fines Shein One Million Euros for Misleading Sustainability Claims
×