Is Now The Time To Buy Or Rent?
To buy or to rent a home? At this very moment, countless consumers across the nation are wrestling with that million dollar question. And the million dollar answer is - it depends. While home buyers can certainly snag some serious deals in this current economy, it doesn't mean that buying is the best choice for you. On the other hand, if you keep renting, you might just miss out on the opportunity of a lifetime. So what's the right choice?

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Before you make a sudden move, take time to evaluate your current situation. Here are five factors to keep in mind as you struggle with today's rent vs. buy dilemma. (For more, check out To Rent Or Buy? The Financial Issues.)

#1: Interest Rates
When interest rates plummeted to record low of 4.71% in December 2009, experts proclaimed that only a fool would choose to rent instead of buy a home. After all, when interest rates are low, you can get more house for your money - not to mention a lower monthly mortgage payment.

But now, rates are slowly increasing. The average rate for a 30-year fixed rate mortgage inched up to 5.06% in late April. Some experts predict that rates will creep up to 6% by this summer and continue on a potentially steep upward rise.

So, if you want to score a great deal on house before interest rates go through the roof, the best time to buy is right now. Of course, interest rates are just one piece of the puzzle. (To learn more, see How Interest Rates Affect The Housing Market.)

#2: Your Financial Situation
If you've built up a fat house savings fund and can afford to put a 5% to 20% down payment on a home, it's pretty much a no-brainer: now is the time to buy. Not only can you get more bang for your buck with today's super low interest rates, but buying a home is generally a smart long-term investment that offers valuable tax advantages.

To top it off, monthly mortgage payments cost almost the same as rent right now. Recent estimates show that the difference between monthly rents and mortgage payments is at the lowest level in nearly 20 years. In some cities, the difference between monthly rent and monthly mortgage payments is less than $100, based on a Marcus & Millichap Real Estate Investment Services study.

On the other hand, if you just got laid off, your savings account is running on empty, and you're struggling to put food on the table, you should probably stick with the renting route. While you may be able to handle the monthly mortgage payment, there are countless other costs that go hand in hand with home ownership. Unlike renters, homeowners have to pay for house repairs, yard supplies, 100% of the utilities and, in many cases, homeowners association dues.

#3: Where You Live
Your home town is also critical factor in the rent vs. buy conundrum. While the mortgage-rent gap is closing in many parts of the country, it still costs an arm and a leg to buy homes in other areas. On the other hand, rent costs a small fortune in some cities. That's why it's important to do your research and take the temperature of your local real estate market.

For example, in San Francisco, Portland and Seattle, homeowners pay hundreds, even thousands, of dollars more a month than renters. On the other hand, if you live in certain neighborhoods in New York, Chicago, Houston, South Florida or Atlanta it may be cheaper to buy than it is to rent right now.

#4: How Long You Plan to Stay
If you only plan to stay put for two years, you should probably consider renting. Most real estate experts say it generally takes three to six years for a home's value to appreciate enough to offset the costs of selling the house and moving.

If you have plans of staying in your home for six years or longer, many experts say you should buy. Some figures show that homeowners who stay in one place for six years save an average of $124 a year on a $172,000 home - which means owning a home will cost you $745 less than renting over the six-year span.

Plus, the longer you own a home, the more you save. If you buy a home and stay for 10 years, you'll save a whopping $2,232 a year on average. That adds up to a grand total of $22,320 worth of savings - all because you chose to buy instead of rent.

#5: Your Mental State
Some people are simply not mentally ready to own a home - and they may never be. If you're one of those carefree types who spontaneously decides to move to the beach one year and the mountains the next, buying a home probably isn't a wise decision.

On the other hand, if the idea of owning a home gives you a sense of stability and comfort, if you're ready and willing pour blood, sweat and tears into your new house and give it plenty of t.l.c., then you're mentally prepared to buy.

The Bottom Line
With record low interest rates and plenty of fabulous deals to be had, there is no question that now is a great time to buy a home. Even so, it may not be the best time for you to buy a home. Before you dive into home ownership, take stock of your personal and financial situation. With a little soul-searching and plenty of number crunching, you'll figure out the right answer. (For more, see To Rent Or Buy? There's More To It Than Money.)

Still feeling uninformed? Read this week's financial news highlights in Water Cooler Finance: Buffett's Armed and Greece Keeps Falling.





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