I've been getting a lot of questions lately about how does a person know if it is better for them to buy or rent. There are times when it is much better to rent for a while--usually if you expect to be in a place temporarily it's better to rent. If you plan to stay in one place 4-5 years, or more, financially you are better off buying a house.

Many people assume they don't qualify for buying a house, but they haven't talked to a banker or mortgage broker to find out what their status is. There are as many variables in a person's finances as there are people, so there is no cookie cutter answer, which is why it is best to talk to a banker or mortgage broker--maybe even more than one--I've worked with people that have been told previously they don't qualify to buy a home, yet, within a month of being told this, and a different lender, they were approved and moved into their new home.

Buying a house is the first step many people take towards long-term wealth management. Think of it this way, if you rent for 30 years, all the while your rent is going up, maybe not very much, but it seems every time you get a payraise, it goes straight for the increased rent. With a fixed rate mortgage, the money you put to the mortgage each month pays down the equity in your home. After 30 years, you own this property and have more options than you would had you rented all that time. I have a friend who's husband passed away after 40+ years of marriage. They lived in the same house for 28 years--renting. On her social security, she could no longer afford the low rent (the landlord rarely raised the rent as they were such good tenants!), so out the door she had to go...with very few options. She's angry because had they bought that same house 28 years earlier, she would have had so many options--even to rent out the other rooms in her house to pay off the last 2 years of her mortgage...and then have a place to stay rent-free the rest of her life...

The following is taken from the Florida Association of Realtor's website, and the full article link is below;

For someone who plans to stay put more than two or three years, home ownership usually makes more sense financially. The key benefits include annual tax benefits, "forced savings" from paying down the mortgage and potential appreciation in value. "Owning a home is one of the best builders of wealth," says Todd Nordstrom, a sales associate with Esslinger Wooten Maxwell, Miami Beach. "There is a huge difference in net worth between renters and owners." In fact, the most recent Federal Reserve Survey of Consumer Finances shows the median net wealth of a homeowner household is $171,700 compared with just $4,800 for a renter household.

http://www.realtor.org/PublicAffairsWeb.nsf/Pages/TPHousingasanInvestment

Enjoy!