If you’ve been renting for awhile, you probably are daydreaming about having a home where you can change the paint colors on a whim, hang your wall art with nails instead of removable hooks, and not worry about unpredictable rent increases. However, home ownership is a big financial commitment and there are many questions and costs to consider before making that investment.
The biggest cost that potential first time home buyers think about is usually the down payment. It can be overwhelming to think about saving that lump sum while also paying rent. In 2017, according to statistics compiled by InfoSparks from Midwest Real Estate Date, the median sale price for a 2 bedroom in zip code 60657 (which covers most of Lakeview) was $379,000. Luckily, there are financing options that don’t require 20% down, which means that a first time buyer can get into a home faster and start building equity rather than paying rent. You may be able to purchase a home with as little as 3.5% down and if you are a veteran, you may be eligible for a VA loan with 0% down.
However, the down payment is the not the only upfront cost of homeownership. During the purchase process there will be fees for the appraisal, inspection, and attorney, as well as closing costs, such as transfer tax stamps. Many condo buildings also have a move-in fee, so it is important to talk to your lender and real estate agent about what you need to budget to get to the closing table. Once you close on a home, repairs and regular maintenance will now be your responsibility. However, the financial investment gives you freedom to customize your home that renting does not.
When you are deciding whether to buy or rent, it is important to think about how long you expect to stay in the home. If you are only planning to spend a year or two in a home, then the equity you gain over that time may not be enough to offset the costs of buying and selling. Unless you are in a hot market with high appreciation rates, you may want to think twice before purchasing a home if you expect to spend less than 3 years in it.
Of course, life changes happen unexpectedly, so it is good to have an exit strategy if you do have to move earlier than you initially planned. If your property allows rentals, you can become a landlord and turn your home into an investment property. A home that appeals to a wide range of buyers and is in an established neighborhood that maintains home values shouldn’t linger on the market if it is priced correctly. When you are looking at homes, considering the resale appeal and whether it can be rented will help you feel confident in your choice.
Renting also has its drawbacks, such as yearly rent increases and the often high costs to break a lease if you need to move before the term is up. A great landlord or management company can make renting stress-free, but if there is deferred maintenance in the building, you may find yourself making frustrated phone calls to get things fixed.
If you have savings that can be used for a downpayment, a stable job that you expect will keep you in the area for the foreseeable future, and a good credit score, you may want to consider buying. If you are thinking about making a career move that could relocate you or you don’t yet have an emergency fund saved up, renting might be your best option. An agent in your area will be able to discuss the current market with you and show you what homes are for sale and for rent in your budget so that you can make an informed decision.
Whether you are looking to rent or buy, contact Joe to discuss your specific situation and to learn more about the Chicago real estate market: email@example.com