The idea of buying a house or an apartment in your first years out of college may sound scary. Nevertheless, we keep hearing that if you’re paying rent you “might as well be throwing a way your money.” So how much could you really save if you were to….. buy a house?
We can break down the costs of RENTING versus BUYING a home by looking at this decision and asking 3 questions:
(1) What will you pay up front?
(2) What will you pay each month?
(3) What will be the real “cost” when all is said and done?
1) Historically, Buyers have had to spend more cash up front than renters. Renters have to hand over as much as three months’ rent when they first sign a lease, first and last months’ rent, plus a security deposit in the amount of one month’s rent. However, Tuscaloosa is very lucky that the entire Tuscaloosa County is USDA eligible for 100% financing!!! In order to qualify for a USDA loan you must have a 640 minimum credit score and your income cannot exceed $74,450 (for families of 1-4) and income cannot exceed $98,650 (for families of 5-8). This loan program can allow the buyer to get into a home with less cash up front!
First Months- $1,500.00 Down Payment USDA- $0.00
Last Months- $1,500.00
Security Deposit- $1,500.00
Total- $4,500.00 Total- $0.00
2) Second, we will look at the dreaded monthly bills: Renters pay rent, which can include utilities, while buyers pay their mortgage payments. But, even if the buyer’s mortgage is higher than the rent, we can’t forget that the homeowner can deduct property taxes and interest paid!
Rent- $1,500.00 Mortgage on $185,000.00
Principal and Interest $1,280.00
USDA Monthly Fee- $65.00
Taxes and Insurance- $150.00
Total- $1,500.00 Total- $1,495.00
3) Lastly, long term what are the two parties left with? For buyers, it’s equity! The homeowner can sell their home and will hopefully have appreciated in value! The Renter however, will walk away with memories and a drained bank account! A $1,500 rental will cost you $18,000 in just 1 year, $90,000 in 5 years, and $180,000 in 10 years. All that money goes to your landlord – not you and especially not your future wealth.
How can you decide if you should buy or rent? Call, text or email me & I will set up an appointment, map out a personalized plan, and introduce you to lenders who can help you meet your financing needs and see whether renting or buying fits your needs best!