If you’re thinking about buying a home for the first time, you may wonder what the best home option is for you: a new home, existing home or a rental home.
The best option for you depends on your current financial situation, how much work you’re willing to put into your home and how much of an investment you’re looking to make of it.
Atlanta real estate broker and attorney Bruce Ailion says your affordability, credit and your foreseeable work and personal stability are also important determining factors.
“For those with a sufficient down payment, average or better credit and a stable personal and work circumstance, owning is nearly always the best choice,” says Ailion. “If you are not sure where you will be next year, have little to no money saved and less than average credit, renting may be your only option and likely the best living situation.”
Many first-time homebuyers today are Millennials, which means not all are ready to settle down yet. Whitney Nicely, Millennial real estate coach and expert and a Millennial herself, says many in her generation aren’t quite ready for the responsibility of buying a house.
“As far as options, there are plenty of mortgage brokers and people that would love to get more Millennials into houses, but Millennials just aren’t ready for it,” says Nicely. “Until they’re ready, then they’re going to rent, they’re going to stay at mom’s house. There are plenty of options, plenty of grants, plenty of money available and ready for them, but they just aren’t getting into the stream of it as the generation before them did.”
If you’re thinking about making the transition from renting to buying a home, according to our real estate experts, buying a home is often a good decision. You should, however, consider your own personal situation before going forward.
If you are one of those who has decided to purchase a home, there are many reasons you should make to decide if a newly built home is right for you.
For homeowners looking to have a fully customizable home with brand-new features and amenities and that needs very little work done to it, then a new home may be perfect for you.
Mark Ferguson, real estate investor and creator of real estate blog InvestFourMore, says that the price of a new-construction home is likely to be higher than a resale home because you are paying a premium for having everything new in the home.
“You really have to look at the upgrade list and what’s included in a new construction house to properly compare it to an existing house,” says Ferguson.
Understanding the costs of new construction will go a long way in ensuring that when you compare new and resale, you are comparing apples to apples.
If you don’t mind the maintenance that comes with an older home, resale may be for you. Some buyers prefer resale homes because they like to do home projects or because they want to buy in an established neighborhood.
No matter if you are buying a newly built home or a resale home, Ailion says homeownership offers a different set of benefits compared to renting.
“Typically the cost to purchase a home involves more money up front, anywhere from 3 percent to 20 percent down,” he says. “The benefit is the cost to occupy is somewhere between 35 to 45 percent less. You do have to pay to maintain the property. Taxes and mortgage interest paid on the home loan are tax-deductible for those who itemize their deductions. The capital gain on sale is largely untaxed. With a fixed-rate loan, your payment, unlike rent, will remain constant. As you make your mortgage payment, the principle is being reduced; this is in a way a forced savings account.”
Most real estate experts, such as Ferguson, Nicely and Ailion would advise to buy a home opposed to renting. If you’re in a place in your life where you’re constantly moving and don’t want to worry about maintaining a home on your own, then renting may benefit you more than owning a home.
“Renting has the primary feature of flexibility and a short-term commitment,” says Ailion. “There is typically a lower cost to entry and a security deposit is less than a down payment. If the AC or refrigerator breaks, it is the landlord’s responsibility to fix the item. In the event your personal or work life changes, you have the flexibility of terminating the lease or moving at the end. Rental housing may be closer to transportation arteries and employment centers; they may also offer smaller and more affordable options to this infrastructure than an owned property.”
“A lot of people don’t want the responsibility of owning a house, so they opt to rent and that’s just a personal choice,” adds Nicely. “If you have a busy job and you don’t want to worry about mowing the yard, you don’t want to worry about calling the plumber when your kid flushes something down the toilet, then rent. There’s nothing wrong with that, but realize you’re making somebody else rich when you’re renting.”
But if you do get to a place in your life where you’re settled and committed to living in one place for a few years, then buying a home could be the best and most important investment you can make.
Amy Olivarez is a former Digital Content Intern for NewHomeSource. She graduated in Fall 2016 from Texas Tech University majoring in Electronic Media Communications.