While homeownership rate in the U.S. has risen slightly since attaining a 50-year low in 2016, it’s at a generational low at 63.7%. Consequently, more people are opting to rent instead of buying their homes recently compared to the past.
Whether you choose to rent or purchase your residential place is a huge decision. It doesn’t merely influence the amount of money you have left end month. You’ll discover it affects the savings you accumulate over time and your lifestyle as well.
People purchase homes when they’d be better off financially if they rent. Similarly, people opt to rent because of the minimal responsibility and flexibility this option offers even though they’re likely to amass a bigger net worth over time if they purchased a home.
Of the two choices, the bias frequently leans toward ownership. After all, it’s a huge business for everybody from real estate agents to mortgage lenders and home improvement stores.
Nevertheless, homeownership isn’t generally better than renting, nor is renting simpler than ownership. Here’s a list of reasons why more Americans are opting for rental communities instead of ownership.
Many Find the Home Purchasing Process to be Overwhelming
A huge number of Americans think that the process of purchasing a home is overwhelming. It’s easy to see why many feel this way. From house hunting to the mortgage process and negotiation with the sellers, purchasing a home can be a stressful and time-consuming process.
The mortgage process itself usually takes a month or more from the time you sign the contract to the time you take ownership of the home. On the other hand, if you decide to rent it’s comparatively easy to examine a few options, present an application, security deposit, and move into the rental within days-not months or weeks.
This can be a particularly motivating factor because Americans value simplicity, convenience, and the home buying procedure isn’t particularly simple or convenient.
Real Estate Taxes
An apparent benefit that tenants have over homeowners is that they don’t need to pay real estate taxes. Bear in mind that the taxes can be a large burden and differ by county.
Although tax calculations can be intricate, they’re determined based on your home’s approximated property value. With homes getting larger, property taxes can be a considerable financial burden.
It’s Difficult to Raise a Down Payment
Numerous people incorrectly believe that you require 20% down payment to purchase a home. While 20% is certainly the industry standard and can help you avoid mortgage insurance, it’s possible to purchase a home with less upfront.
If your credit is good, you can acquire a conventional mortgage with as little as 3% and even those whose credit isn’t good can obtain an FHA mortgage with a 3.5% down payment. Actually, first-time buyers pay just 6% on average. Nevertheless, this needs a considerable amount of savings.
Additionally, closing costs typically add another 2%-5% of the sale cost, and lenders usually want at least a couple of months’ worth of mortgage payments reserved. Therefore, even if you have a 3% down payment, a homebuyer could require more than $15,000 in cash on average.
Final Thoughts
Although more Americans are opting to rent and have done this in current decades, it’s important to note that over 60% of homes are owner-occupied. There are some valid reasons for home ownership and some good reasons to consider renting. The best option for you is dependent on various factors, so you must weigh the cons and pros of every option before deciding whether to be a homeowner or renter.
For more information on renting, contact us at Apartment Agents or leave a comment.