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Should You Rent or Buy? Some Tips to Help Decide

Todays Date: December 10, 2018

Its always been an accepted fact that it makes more sense to buy a home rather than rent if you have the money. But the last 24 months have turned those beliefs upside down and folks are finding an uncommon real estate market that is difficult to understand.

While abnormally low interest rates and tumbling home prices suggest the best option is to buy a home, more and more people are deciding to rent, or to rent-to-own instead. However, it isnt always easy to decide which option is best.

So, generally speaking, when does it make sense to rent, and when to buy? I find that there are five basic factors to help you decide:

1. Credit Score. Unless your credit score is near perfect, getting a mortgage loan in the current environment will be very difficult. You may want to rent-to-own in that circumstance, which will allow you to build your credit history over time and still build equity. On the other hand, if you have a great credit score, you may be able to get a loan at the lowest interest rates our country has seen in fifty years.

2. Cash Flow Needs. It is critical nowadays to make sure you have enough cash flow to meet all of your monthly obligations, and many people are finding that it is hard to set aside extra to build the down payment needed for most mortgage loans. These folks are finding that monthly rent are typically lower than a monthly mortgage payment, which allows them to preserve their good credit and meet other monthly expenses more easily.

3. Employment Concerns. The other day, I read a quote by Forbes.com columnist Matt Woolsey, where he stated “Given the state of the job market right now, the anchor of full ownership is a heavy one.” I have witnessed this heavy anchor with many of my customers, who are concerned over losing their jobs. If you share this unease, the rent or rent-to-own strategy may be for you, as it will preserve your credit and avoid a foreclosure scenario if you are unable to make payments.

4. The Flee Factor. Its not always a good move to purchase immediately when relocating to a new city or state. By renting, you are able to explore all of the area options before selecting the neighborhood you want to set down roots in, rather than a quick purchase and possibility of needing to sell before prices have increased enough to avoid a loss on the transaction.

5. Market Unpredictability. Even in markets that appear to be recovering more quickly, like Denver, the verdict is mixed as to when the real estate housing market will truly come back. A lot of consumers feel more comfortable waiting the market out until the data clears by renting rather than buying.

Each option has their pros and cons, and the important thing to do is to learn all you can so that you can make the choice that is right for you. A knowledgeable real estate professional is key to making your decision. They may point out some new and unusual options that are available and that may be exactly right for your situation.

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