To buy or not to buy?
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Whether you decide to rent or buy your home may depend on four important questions:
1. Where do you want to buy?
In many areas you may find that housing prices are affordable. One housing affordability index shows 66.5% of homes are affordable to families earning the median income.
2. How long do you plan to own the home?
Transaction costs take time to recoup, so the decision to buy improves with a longer time horizon. On average, if you plan to stay in the home for five years or more, consider buying.
3. What percentage of your income will go toward payments?
As a rule of thumb, you should consider spending no more than 28% of your income on housing.
4. What is the price-to-rent ratio in your neighborhood?
This ratio is the home price divided by the annual rent. A good ratio is below 15. A $300,000 home that rents for $2,500 a month or $30,000 a year has a ratio of 10, which means it may make more sense to buy. One study found that buying a home is more affordable than renting in the top 100 major cities in the U.S.
To buy or not to buy is an important question.
Contact Joel and his team for more information.