Back in May last year, the Woodrow Wilson Center published survey data showing that home ownership is still an integral part of the American dream. If you are like 90 percent of the respondents under 45 who indicated they are renting but want to purchase their own home in the future, now might be a perfect time to buy. But how do you determine if buying now makes sense for your financial situation? It is a good idea to do some very simple research -- laid out step by step below -- to help you reach a decision.
Everyone knows that mortgage rates are at or near all-time lows, and that house prices are just beginning to rise. Together these mean that home ownership is still exceptionally affordable, and that for many, many renters this could be a once-in-a-lifetime opportunity to buy their own property on historically excellent terms. However, the situation doesn't apply to everyone. The housing picture across the nation differs wildly, and so does the math behind a buying-vs.-renting decision.
Luckily, HSH.com has a handy online calculator that can help you make a more informed choice without first getting a bachelor's degree in applied math. You can input figures for your monthly rent, the down payment you have, the interest rate and property taxes you are likely to pay (some items are estimated for you and other items you can estimate), and then it tells you how much home you can afford and whether you would gain or lose by making the purchase.
Your personal plans can also influence your buy-vs.-rent decision. Closing costs when you buy can add up, and many advisers say that you shouldn't purchase a home unless you intend to stay in it for at least five years -- and that period can vary according to your employment situation and where you live.
There is wide consensus that mortgage lenders are gradually easing their requirements for borrowers. We're certainly still a long way off the situation in 2007, when pretty much anyone who could mist a mirror could get approved for a home loan, but things are getting better all the time. Couple the prospect of relaxed lending standards with low interest rates and low housing prices, and it appears that it is a very good time to buy. So providing that your credit is good, it may be worth your time to make application now, even if you were turned down a year or two ago. Check out this FHA Mortgage Loan Calculator for a bit more help in deciding.