Renting vs owning: What to consider before you decide

To rent or not to rent? Needless to say, the answer is not the same for everyone.

If you’re a current renter considering buying your first home, countless factors can influence your decision for when to start this process. We’re here to help organize those thoughts by listing some of those factors in one place, so you can get more clarity on when the timing may be right for you.

First, take some time to reflect on your overall goals and feelings about homeownership. How important is it for you to own a home you can call yours? That answer is different from person to person. How driven are you to grow your personal or financial goals? Homeownership can be a path that can help achieve your goals.

Also reflect on your emotions and whether you feel ready to buy a home. Consider the timing of a homebuying journey alongside the rest of your life: the search process is long and may bring challenges. If you have other stressors you anticipate in the foreseeable future, such as a significant job or family change, consider whether you can afford to wait or if a home search will work alongside the rest of your life events. Don’t forget what follows the home search process as well – the moving process and the feeling of “settling in” to a new home will also take time and bring its own emotions.

If you’ve bought into the idea of owning a home and transitioning away from renting, an important first financial step is to compare what your monthly and ongoing costs will look like between renting and owning. If you’re currently a renter, your housing costs probably consist primarily of these items:

• Recurring rent payments
• Renter’s insurance
• Utilities
• Any upfront costs/security deposits that were required at signing

Homeowners will have to handle similar costs – mortgage payments, homeowners insurance, utilities, and upfront costs (closing costs and they downpayment) – while also taking on maintenance costs and property taxes, which generally don’t fall within renters’ costs. If you’re looking for a more detailed breakdown, you can read more about our comparison between the cost of renting vs. buying a home.

While you are analyzing what will change in your housing costs, you should also look at your overall financial picture:

• What does your credit look like? Having a good credit score equips you with more options before you embark on your home buying journey and will typically put you in better standing with lenders.
• How much have you saved? While savings can help impact larger costs along the journey, like your down payment, you’ll likely want to utilize other funds besides your savings for ongoing costs, like your mortgage payments or insurance fees.
• How stable will your finances be in the future? As you prepare to take on long-term ongoing costs, ask how confident you will feel about your ability to pay these costs in a timely manner. For example, having late mortgage payments can negatively impact your credit score. If you anticipate having more financial stability in the future, consider planning a home purchase around that time.

If you feel confident about your emotional buy-in to owning a home and your financial landscape, you’ll also want to consider other factors before you start your search:

• How long do you plan on staying in the area you’re living in? If you have doubts about staying in your current city or neighborhood long-term, it may make sense to keep the flexibility you have as a renter until you’re more certain you plan to put down roots.
• What are the housing market conditions like in your area? If you live in a region with a high cost of living, take that into consideration with what the housing market in your area looks like. You may also want to know which neighborhoods align best with your wants, needs, and budget.

Buying your first home is a big deal – and not a decision to take lightly or rush into. If now feels like a good time to make the move from renter to first-time homebuyer, check out what loans and programs may be available for you.