There’s intense competition for homes in areas where home inventory is low, and cash buyers often get the nod in situations where there are multiple offers.But there’s a new option for
Considering Buying a Home? Here are some of the Pros & Cons!
Dated: March 25 2020
Deciding to buy a home when I was 23 instead of continuing to rent had an incredibly positive and far-reaching effect on the financial stability of my family. Deciding to take the leap into home ownership, especially if it’s your first time, can be naturally scary. It is my hope that understanding some of the pros and cons of purchasing your first home will help you feel confident whether or not home ownership is the right decision for you!
PRO: You can save money on your monthly budget.
Mortgage payments are usually less than rent¹. This is almost guaranteed (in the post great recession market) to be true unless you are renting from friends or family who have given you a reduced rate, or if you live in a big city² with a more complex supply/demand situation. Landlords typically try to make a profit on rentals of a few hundred dollars, on top of any costs that they incur to regularly maintain the property. When you buy a home you are shopping for more than granite countertops and a pool - you are shopping for a consistent monthly mortgage amount that will give you increased financial freedom. When you set out on your homebuying adventure, a good place to start is by looking into what your ideal monthly mortgage payment is and then seeing how much of your dream house that will buy. An added bonus - you are never at risk of your payment increasing (such as with a landlord), and you will likely have the chance to refinance your mortgage as rates fluctuate to reduce your monthly payment even further.
CON: You have to pay to play.
Buying a home can be expensive, especially if you don’t have a realtor who negotiates well. People typically know that buying a home means saving up a downpayment. This is true for most people, but there are various options such as a VA loan or a first time homebuyer program that allows buyers to include the down payment in the price of the home. With the downpayment aside, there are still other expenditures to consider. For example, take into account a home inspection, the loan origination fee, and various loan service charges into your final cost to close. Michael Hyman, a Research Data Specialist for the National Association of REALTORS, breaks down what these loan service charges usually consist of: an appraisal, a credit report fee, flood determination and certificate, tax status, pest inspection, title search, and insurance and survey fees³. Even with that being said - a good realtor can often negotiate some of these costs into your offer, and a good mortgage broker can at times find ways to contribute funds to these expenses. The importance of finding a proven, reliable realtor and mortgage company cannot be overstated.
PRO: You will be actively investing yourself, not someone else.
Every month that you are renting, you are paying someone else’s mortgage and paying them to collect it from you. When you own a home, every monthly payment is an investment in your own wealth. People often compare homeownership to a forced savings plan - and this is absolutely true to an extent. While you are paying a significant percent of your monthly cost to the bank (towards interest), those “losses” are incomparable to the amount of money you would otherwise be paying to your landlord. And even if your monthly contribution to the principal (actual loan amount) seems small, don’t forget that property has a fantastic record for increasing in value over time. Even if the market “crashes,” long-term home values will rebound given enough time. The only people who drown in the storm are those who jump off the ship. This idea is confirmed by a February 2020 research study conducted by the National Association of Realtors that analyzed whether homeowners are more likely to experience a home price gain or loss during the period when they hold a home.
CON: Buying a home can be stressful.
I have heard friends and acquaintances describe buying their home as one of the most stressful experiences of their life. With so much money on the line, and your everyday living situation put into question, it’s no wonder that some people simply don’t find it worth the stress. But don’t be deceived - it is totally up to you whether that is your home-buying experience or not. Taking the time to select a realtor that will educate you, negotiate for you, and understand you can make all the difference. Realtors do not just draw up paperwork for their clients, a good realtor is a mentor, guide, and counselor. The stress that comes with home buying can be replaced with excitement when buyers know exactly what is expected of them and what they can expect from their realtor. On that same note, save yourself a headache and seriously consider the mortgage company that your realtor suggests. Banks and bigbox mortgage companies can be slow and ineffective, causing stress and even putting contract timelines at risk.
This is not an exhaustive list of all of the pros and cons of investing in your first home but I hope you will consider these points! If you, a friend of yours or a family member are considering an investment in real estate please share this with them and feel free to reach out to me with any questions!
Greater Charleston Area Homes For Sale: Jose Rey, Realtor and Chief People Officer with Southern Shores Real Estate Group in Charleston, SC. Advocating for sellers and buyers with professional real estate services. Nothing compares to having a real estate agent providing true data and research to make an informed and educated decision. You can get information about real estate in; Awendaw, Charleston, Cottageville Daniel Island, Folly Beach, Goose Creek, Hanahan, Harleyville, Hilton Head Island, Isle Of Palms, James Island, Johns Island, Kiawah Island, Knightsville, Ladson, Lincolnville, Moncks Corner, Mount Pleasant, North Charleston, Ravenel, Ridgeville, Saint George, St. George, Sullivans Island, Summerville, Ladson, Ridgeville, Wadmalaw Island, Walterboro. Click here!
¹ There can be expenses you have to pay monthly in addition to your mortgage that add to your total cost such as flood insurance, HOA fees, and mortgage insurance.
² Attom Data Study, Jan 2020, https://www.attomdata.com/news/market-trends/attom-data-solutions-2020-rental-affordability-report/
Realtor, Jose Rey, feels blessed to call the Charleston-area home; so much so that he is dedicating his career to helping others do the same. As a successful real estate investor himself, he now enjoy....