It may be a “buyer’s market” in lower Fairfield County but current fluctuations in the economy and the housing market can complicate the decision whether to buy or rent a home. How does one know what is the right choice? First County Bank recommends that potential buyers ask themselves several key questions before making this important decision.
- “What will monthly costs be, and can I afford the payments?”
Keeping mortgage payments under 30 percent of your gross monthly income is a good rule of thumb. If you can’t keep mortgage payments to less than that percentage, it may be better to rent for a while.
- “What other debt do I have?”
Total rent or mortgage payments plus credit obligations should not exceed 35 to 40 percent of gross monthly income.
- “What is my credit score? Can I qualify for a good interest rate?”
A high credit score indicates strong creditworthiness, and that qualifies a borrower for better interest rates, whether they are mortgage loans or credit cards. Maxing out credit lines and paying bills late will lower a credit score. The impact of a credit score on an interest rate can be significant. Lower interest rates also mean lower monthly payments. If a borrower’s credit score is low, he may want to delay buying a home until he can improve his score.
- “How much will taxes, monthly maintenance and other fees cost?”
Owning a home means you will have to pay real estate taxes and other carrying costs like insurance and maintenance. On the other hand, owning a home brings big tax savings at the end of the year. As a renter, the owner typically pays those costs.
- “How many years will I stay here?”
Generally, the longer one plans to live someplace, the more sense it makes to buy. Over time, a homeowner builds equity in the house and its value should increase over years.
Is buying better than renting after 5 years? Is it best to only consider buying? Everyone’s financial picture is different. In order to compare the costs of buying or renting we invite you to do some calculations of your own here http://www.nytimes.com/interactive/business/buy-rent-calculator.html to determine what’s best for you. For additional information about buying vs. renting, consumers should call David Zamary, senior vice president residential lending at First County Bank, at 203.462.4330.