Renting Vs. Buying
With every rent check you write, you’re helping to build equity in your landlord’s property. That money could be going toward building equity in a home of your own.
Rent prices usually go up over time. So do home prices. While you cannot control what you pay for rent, you can control what you pay to live in your own home. The point is, life gets more expensive over time, and the only way to secure your housing future is to own a home.
Most everyone knows the advantages of buying over renting: Equity that builds over time. A safeguard against inflation. Tax-deductible mortgage payments. The satisfaction of living in a home that you can improve or modify to your liking without worrying about a landlord.
But coming up with a down payment, qualifying for a loan, and finding a suitable home in the neighborhood of your choice can be setbacks to ownership. So here are few things to consider when weighing one option against the other:
- How long you plan to stay: Buying usually is better the longer you stay, since your upfront fees are spread out over many years.
- Tax liabilities: Property taxes and mortgage/interest costs are important, and probably tax-deductible. Be sure to consult your tax adviser to understand all the tax advantages of homeownership.
- Closing costs can add up: Fees for home inspection, title search, and mortgage insurance are part of the home-buying process. Plus, you’ll have moving expenses when you buy or sell. Talk to your agent and let him or her help you develop a strategy that will keep these fees to a minimum.
- Maintenance and upkeep: Owning a home means paying for things that renters typically do not. They can range from painting and carpeting to water bills and trash pickup. Setting up a “Home” savings account will help keep “Murphy’s Law” at a comfortable distance.
Deciding between the flexibility of renting and the potential long-term reward of homeowning is on the minds of many would-be buyers. Want to take a stab at crunching the numbers yourself? This interactive calculator from realtor.com examines the most important costs associated with buying a house, and computes the equivalent monthly rent.
How Much Can I Afford?
The journey to homeownership starts by understanding how much you can afford. One major thing to consider is your down payment, if any. Many consumers believe it’s impossible to buy a home without at least 20 percent down. But thanks to various government-sponsored programs, many people can now buy a house with as little as 3.5 percent toward a down payment. Veterans of the U.S. military have zero-down programs available.
PRE-QUALIFICATION VS. PRE-APPROVAL
Pre-qualification and pre-approval are two terms you’ll hear frequently when preparing to buy a home; however, they are not interchangeable. Pre-qualification is a simple estimate of how much you could afford, whereas pre-approval is when you get your mortgage loan amount approved. You don’t need to be pre-qualified to start looking for a home, but you will need to be pre-approved before you begin negotiating. So it’s best to get this part out of the way early.
The home-financing process can be completed directly through our affiliated home financing services, a mortgage broker, or through your own bank. Ask your loan officer about paperwork required for applying and you could get a decision in a matter of days.
Once you’ve been pre-approved, the real fun begins and it’s time to find your dream home. When looking for homes, keep in mind your current income. Although you might be pre-approved for a certain amount, are the payments on that loan feasible for you to make every month? Ensure that the price range you’re looking at is sustainable for your current lifestyle and budget.
When buying a home, you’ll also be required to pay closing costs. These are essentially fees charged by lenders and other third parties involved in the purchase of your new home. Closing costs can range between 2 and 5 percent of the home price, and payment is required before you close on your new home. In addition to your down payment, be sure you have money set aside to cover closing costs.
As a homeowner, you’ll begin to pay property taxes. The amount of tax you pay depends on where the property is located. Rates vary, but thanks to California’s Proposition 13, your annual property tax liability will remain mostly predictable year after year.
Learn about our home financing services and more.
Why Work With a Real Estate Agent
You could search for your next home all by yourself. But why? With an experienced Berkshire Hathaway HomeServices California Properties sales professional at your side, finding the perfect home is easier, faster, and a lot more fun.
A great agent can offer valuable advice and coach you through the entire home-buying process. Yet many buyers still spend endless hours poring through classified ads, driving all over town, and viewing dozens of unsuitable properties – simply because they haven’t connected with a licensed real estate agent. In today’s information world, having an experienced agent working to decode and guide you through the chaos is invaluable.
FINDING THE RIGHT AGENT FOR YOU
Chemistry is important. So are professional credentials. Above all, you’ll want an experienced agent who has the resources of a leading real estate firm behind him or her – a firm such as Berkshire Hathaway HomeServices California Properties.
ADVICE ON FINDING AND WORKING WITH AN AGENT
- Ask friends, neighbors, and co-workers for local referrals.
- Talk to your family members and trust those who have your best interest in mind.
- Interview more than one agent before hiring.
- Share with your potential agent as much as possible about your expectations such as price range, neighborhoods, flexibility, and time frame.
- Trust your intuition.
ASKING THE RIGHT QUESTIONS
Before you commit to working with one agent, be sure to ask plenty of questions. A good agent will welcome your questions to better understand your goals to help strategically search the properties that best fit your needs and lifestyle. Some typical questions to ask a potential agent:
“How will you help me find a home?”
Buying a home takes more than visiting open houses and making appointments to see homes for sale. Your agent should not only be up to date on the latest social media and marketing practices, but also belong to a strong network of fellow professionals, local organizations, and civic groups. Memberships in Rotary, Toastmasters, and similar associations can lead to knowledge about homes that meet your criteria.
“How well do you know the area(s) that interest(s) me?”
An agent who knows the area or neighborhood you are interested in is extremely beneficial to you. While licensed agents are allowed to represent buyers and sellers anywhere in their state, it helps to select one who is familiar with your desired region.
“How do I know you will provide me with personalized attention?”
Even the busiest agents can provide great service because they know how to keep the process moving for their clients. They have put in place procedures and partnered with other professionals to keep you informed every step of the way.
“Will you handle all aspects of my transaction or delegate some tasks to an administrative assistant?”
If you choose to work with a busy agent, a knowledgeable assistant can be very helpful when you have questions or need immediate attention. Every agent has a unique structure for his or her business; find one that best suits you.
“Will you provide a list of clients you have helped purchase homes in the past 12 months?”
Contact some clients who have worked with the agent and ask them about their experiences. The list should contain addresses, property types, names of sellers or buyers, sale dates, and prices. Ask the agent for testimonials from satisfied customers.
“What is your negotiating strategy and how will it help me maximize opportunities?”
Negotiating contracts is one of the most important aspects of buying the right home. Having a plan and understanding market conditions will prepare you prepare for the negotiating process.
For additional questions to ask your real estate agent, check out this list.
What Do You Want in a Home?
While definitely important, “location, location, location” isn’t the only consideration for your home purchase.
Before you start searching online or in person, make a list of the features you would like to have in a home. They can include, but certainly are not limited to:
- Number of bedrooms and bathrooms
- Open floor plan, multi- or single-story
- Fenced or open yard
- Granite countertops in kitchen
- Storage space, number of closets
- Wood flooring or carpetingcon
- Air conditioning
- Swimming pool/hot tub
- Multicar garage
Being clear on what you are looking for will help your real estate agent find that perfect home.
Be prepared: Download our free app. Explore neighborhoods, find your agent, search for homes, all while on the go.
Finding Your Home
Whether you’re buying your first home, fifth home, a vacation property, or an investment property, its location will often determine its future value, and even certain aspects of your everyday life. To help you narrow down the areas that are right for you, begin by making a list of the most important factors.
Once you have a list compiled, do more in-depth research on each potential neighborhood. A good amount of information is available online, but the Internet doesn’t have the full story. To get a true understanding of each neighborhood, take the time to visit at least once, consult your agent, and review the list of considerations below.
- Current employment and future opportunities
- Commute and transportation
- Real estate value
- Crime rates
- Proximity to family, friends, and activities
- School districts
- Town/city population size
- Healthcare facilities
- Proximity to airports
Be sure to choose the location that’s right for you: Do you want to be downtown, in the suburbs, near work? Are schools an important factor? Do you want a community with plenty of outdoor recreational amenities; one with shops, restaurants and nightlife; or one with plenty of activities for children? Choosing the right location will ensure long-term happiness in your home.
Think about whether the house or the community matter more to you, and whether it’s worth it to make a longer commute in order to live in the suburbs, where your purchasing power could go a little further.
Next, take a closer look at the community you have in mind. Try to talk to your potential neighbors, and ask them lots of questions. These people could become your babysitters, your carpool buddies, and your closest friends over the years. If community matters to you, this is an important step you don’t want to overlook.
VISIT MORE THAN ONCE
Some good advice from the National Association of REALTORS®: Visit communities at different times of day and night, and on weekends and weekdays, to get a feel for who lives there and what the activity level is like.
Fair-housing laws prevent sales associates from telling clients about crime statistics or talking about “good” or “bad” schools. However, an agent can direct you to websites that provide information about those topics. Even if you don’t have or don’t plan to have children, buying a home in a well-regarded school district can help the property’s long-term value.