Achieving the goal of buying a house is both exciting and satisfying, but it’s important for prospective buyers to understand the financial investment needed to close on a home while maintaining a secure financial future. To help you understand what would be your best course of action, let’s see how Bluegrass Realty and Investments can help you determine if you should rent or buy a house in Frankfort.
Budget and Finances
One of the most substantial steps to take in seeing if it would be better for you to rent or buy a home is taking a look through your current financial situation.
Begin by creating a realistic budget that accounts for any income as well as any regular expenses. The next step is to maximize the amount of money you can save in anticipation of paying a security deposit on a rental property or a down payment on a new home. Seeing your entire financial reality laid out in hard numbers can both be sobering as well as aid you in finding the best strategy for you in the future.
As you enter adulthood and begin paying off credit cards, loans, and other debts, you start to build up a credit history that will follow you through life.
The longer this credit history goes on to display an ability to responsibly manage your finances and pay off debts, the better off you will be in dealing with landlords, home sellers, and mortgage lenders. However, it’s a good idea to keep an eye on your credit history by ordering your free annual credit report.
Once it arrives, you want to go through the entire report from front to back to both make a thorough list of any outstanding debts and their amounts as well as look for any incorrect information. Since your credit history and score will have a large impact on how lenders and landlords choose to handle your application, you want to ensure everything in this credit report is on the level and go through the dispute process to remedy any errors.
Assess Your Debts
Now that there’s a complete budget as well as a listing of any debts and their amounts owed, it’s a good time to put any excess income toward paying down those debts while continuing to save bits for your future home.
At Bluegrass Realty and Investments, we are ready and willing to do some quick math to help you understand precisely how mortgage lenders and landlords will view your finances through something called your debt-to-income ratio, or DTI. Your DTI is the percentage of your monthly income that is already spoken for being paid to housing, bills, and other outstanding debts. The simple way of looking at your DTI is that the lower it is, the better off you look as an applicant or prospective buyer.
This is where accounting for all of your debts and paying them down as much as possible comes in handy, and helps make the decision of whether to rent or buy a little easier.
Finally, deciding whether you should rent or buy a home can come down to how long you plan to be living in that same location and how quickly you want to make that happen.
If you’re dealing with very little in savings, chances are a rental is going to serve you better in the immediate future. Also, taking your estimated mortgage payment and comparing that to monthly rent helps you see where you will break even in situations where you are renting versus buying. The rule of thumb tends to be if you aren’t going to be living in the same home for a minimum of three years, you’re better off renting.
Guidance Deciding to Rent or Buy in Frankfort
If you want professional guidance in deciding whether it’s a better idea to rent or buy in Frankfort, contact Bluegrass Realty and Investments today at (502) 352-2650!