Advantages Of Home Ownership Versus Renting Home

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This BLOG On Advantages Of Home Ownership Versus Renting Home Was UPDATED And PUBLISHED On November 19th, 2020

Home Ownership can be less expensive than renting and come with tremendous benefits. Advantages Of Home Ownership Versus Renting is countless.
  • In many cases, the security deposit can more than the down payment required for a home purchase
  • Landlords ask for two months security deposit plus first months rent which can be equivalent to costs in buying home
  • Besides the down payment, there are closing costs that come with any home purchase

In this article, we will discuss and cover Advantages Of Home Ownership Versus Renting Home.

Closing Costs Required On Home Purchase

What are the closing costs required when buying a home

Closing costs are the following: one year’s insurance premium, escrows, title charges, attorneys fees, appraisal, home inspection, and other costs associated with a home purchase and getting a mortgage loan

How about closing costs?

  • There are closing costs on a home purchase but keep in mind that the closing costs can be paid by getting a sellers concession and if the seller is not willing to give a sellers concession, the lender can cover all or most of the closing costs by a lenders credit for a slightly higher rate
  • A sellers concession is where the home seller gives you a set dollar amount to assist with the home buyer’s closing costs
  • If the home buyer wants to net $200,000, the home seller and home buyer can agree to inflate the purchase price to $205,000 and give the buyer a $5,000 sellers concession towards the home buyer’s closing costs
  • The drawback is that the home has to appraise out but most cases, it all works out
  • In most cases, the home buyer does not have to worry about closing costs

This is because if the sellers’ concession does not cover all of the home buyer’s closing costs, the lender can give the home buyer a lender’s credit towards closing costs to offset the shortage.

Appreciation Advantages Of Home Ownership Versus Renting

The many advantages of home ownership versus renting include the potential of the home appreciating in value. Gaining equity in the home as well as the advantages of being able to deduct mortgage interest from income taxes is one of the greatest Advantages Of Home Ownership Versus Renting:
  • Homeowners do not permission from the landlord to be able to get a dog, cat, bird, or other pet, get a garden or decorating home to suit needs
  • Homeowners do not have to worry about the insecurity of having to move out
  • This is because the landlord will not renew the lease
  • The question is why doesn’t every renter become a homeowner? 

Just like with everything else in life, for every pro, there is a con and being a homeowner also comes with responsibilities of maintaining home as well as needing reserves in the event if something goes wrong.

Repairs And Maintenance As Homeowners

  • Sometimes repairs can get quite costly
  • Renters contact their landlord if the furnace breaks down
  • The landlord is responsible for the costs of all repairs
  • Homeowners need to fix their own furnace
  • If the furnace is beyond repair, a new furnace can run upwards of more than $1,000

Whether it’s a simple house call from a plumber, repairs for a well and septic system, the air conditioning units running at full blast and breaking down during the summer months, the bottom line it costs money lots of money.

Advantages Of Home Ownership Versus Renting And Maintaining Home

Homeowners who own a single-family home are responsible for general maintenance like landscaping, shoveling snow during the winter months, and other duties associated with maintaining owning a home.
  • The will need to mow their own lawn
  • Do their own landscaping unless they contract a landscaping service or their homeowners’ association that covers it
  • When doing own landscaping, homeowners need to purchase a mower, weed wacker, and other landscape equipment
  • This can be costly not to mention these machines need servicing and often times may break down one or more times per season
Homeowners living in the northern region of the country where there are harsh winters, a breakdown on a furnace can cost hundreds of dollars not to mention the cost of frozen pipes as well
  • Imagine having long driveway the shoveling of snow involved
  • Or hiring snow plowing companies which will probably charge $100.00 or more per service call
  • Moving from a small apartment to a home, homeowners need to consider how much more in utilities they are going to pay
  • In most cases, renters do not pay for water and sewer service
  • Water and sewer bills can be quite costly

Disadvantages Of Home OwnershipWhat are the disadvantages of owning a home

Mortgage underwriters do not calculate utilities when they are qualifying a mortgage loan applicant’s debt to income ratios.
  • Sometimes during harsh winters, gas bills can exceed more than $300 dollars per month
  • Consider electric and gas bills which can easily double than renting an apartment and new home purchase is a larger home
  • When considering purchasing a home, the home buyer needs to not just calculate the additional costs of utilities but also consider having reserves in case if something breaks down
  • Older appliances break down all the time and can be quite costly replacing them
Homeowners cannot be able to just pack up their bags and furniture and move to anywhere they want.
  • Home Ownership comes with responsibilities
  • If ending up with a scumbag neighbor, they will be stuck with them until they either move out or you move out
  • It takes anywhere between 3 to 6 months to sell a home from the moment it is listed

Homes do not sell overnight and even if it is sold, it takes a good 30 to 60 days to close on a home loan.

Cost Of Homeownership

A home buyer needs to consider the cost of home ownership.
  • Even though home ownership has many advantages it also requires responsible budget planning and setting aside reserves
  • Insurance companies nor mortgage lenders cover repairs
  • You must keep in mind property taxes and homeowners association dues increase and can really cause a financial hardship on the homeowner

The truth of the matter is home buyers should be conservative when purchasing their own home and realize the cost of home ownership.

1 Comment
  1. Susan Nathan

    Hello,

    My name is Susan Nathan. I am writing for information about my borrowing options to build or buy new construction in Greenville, SC.

    My husband and I filed for Chapter 7 bankruptcy in February 2019. Our bankruptcy was discharged in May 2019. My husband also had a foreclosure (rental property, 1 VA loan in his name only) that foreclosed the day before we filed. I also had a foreclosure (former principal residence, 2 loans in my name only) that was included in the bankruptcy. The first and second mortgages (Navy Federal portfolio loan and a Title 1 FHA loan) were included in the bankruptcy but the foreclosure has not been completed yet.

    Since the bankruptcy was discharged, we have both been able to re-establish credit with new credit cards and a personal loan each. We have made all our payments on time. Additionally, we have been renting our current residence for 16 months and have paid the rent on time. We would like to purchase a home next year. My husband is a Vet and has some entitlement left over from his foreclosure. We estimate that he can borrow up to $314000 with 0% downpayment. Accounting for the VA funding fee at 3.6%, that would leave us with $303,000 to purchase the land and build the house.

    We are looking to spend up to $50,000 for land and $250,000 to build the house. I found a builder online with suitable housing plans in that price range. We also have our eye on a couple new home communities that have prices in our price range and are currently building new homes. We would be buying a house with a June 2021 (or later) delivery.

    My husband and I have credit scores of 670 and 660 respectively. We are working on paying off our credit card balances to boost our scores. We also have around $8000 vested balances each in our 401k accounts. We both work fulltime, with a combined income over $100k.

    Given our situation, if we can get our scores above 680, would we be able to get a preapproval or loan commitment from a lender so that we can either start construction on a custom build (with a VA construction to perm 100% financing loan) or new construction within a planned community, with the approval conditional on us closing after our 2 year waiting period (i.e. after May 2021)? Can you also tell us what is the credit score threshold to get the best VA rates?

    Thank you for reading through this. Any help you can give is much appreciated. I look forward to your reply.

    Thank you.

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