Rent vs Purchasing a Home

Renting vs Purchasing a Home

What Assistance Can I Get When Renting?

The Department of Housing and Urban Development (HUD) may provide assistance through the Section 8 Housing Choice Voucher program. Section 8 allows Public Housing Authorities (PHAs) to cover most or in some cases all of your rent for select housing units.

The amount PHA's cover is based on Payment Standards which is closely tied to Fair Market Rents click either of the prior to learn more.

Do I Qualify For Section 8?

In order to qualify for the Housing Choice Voucher program you mast meet certain income requirements. Public Housing Authorities must provide 75% of their vouchers to applicants in the Extremely Low Income category (within 30% of an area's median income). Some of a PHA's vouchers may go to those within the Very Low Income category (within 50% of an area's median income).

To see what the Income Limits are for your area click here. To learn find a PHA near you click here.

What Assistance Can I Get When Buying A Home?

When it comes to buying a home there are several different types of loans that can help you fine tune a payment play to your goals and level of income. The three primary types of assistance loans used when setting up a mortgage are:

FHA Loans - Federal Housing Administration Loans - 3.5% down

VA Loans - Veterans Affairs Loans- 0% down

USDA Loans - United States Department of Agriculture Loans - 0% down

FHA Loan Requirements

• Steady employment history (2yrs)
• Social Security Number
• Down-Payment (minimum 3.5%)
• Owner-Occupied Residence (must live in the property you took out the loan for)
• FHA-approved property appraisal
• Front-End Ratio (mortgage + fees + taxes + insurance must all be lower than 31% of gross income 40% may be approved with justification)
• Back-End Ratio (mortgage + all loans and payments must be lower than 43% of gross income, 50% may rarely be approved)
• Minimum credit score of 580 for a minimum down payment of 3.5% or 500-579 with a minimum down payment of 10%
• Two years out of bankruptcy
• Three years out of a foreclosure
• The loan must be within the set Loan Limit for your area

VA Loan Requirements (at least one)

• You have served 90 consecutive days of active service during war time
• You have served 181 days of active service during peacetime
• You have 6 years of service in the National Guard or Reserves
• You are the spouse of a service member who has died in service
• You are the spouse of a service member who has died due to a service-related disability or injury

USDA Loan Requirements

• Must have very low to moderate income
• Home must be in a rural area (population under 35,000)
• U.S citizen or permanent resident
• Must maintain an escrow account with your lender

What Are The Advantages of Renting?

• When renting you can move as soon as your lease is up. Renting allows people a great deal of mobility.
• When renting you don't need worry about managing the property. No mowing the lawn, no paying to have a handyman fix the sink, no need to fix things on your own, these responsibilities all usually fall on the property owner.
• You do not have to pay property taxes. You will only have to pay your rent payment.
• You don't have to worry about finding good homeowners insurance or even paying it.
• If your essential appliances are outdated to the point of inadequacy you may get a free upgrade. No more buying a new stove yourself.

What Are The Disadvantages of Renting?

• You will not be able to make many modifications to your living space. Want to renovate your home? You want to turn a closet into more floor space? You want more power outlets? Sorry you don't own the place. Some rentals won't even let you nail decorations to the walls.
• There may be restrictions on pets. Some types of pets may flat out be forbidden. You may have to pay pet fees for others.
• Your rent can be raised by any amount at any time. If you don't like it you'll have to leave.
• You do not get the feeling of pride and accomplishment of owning your own house.
• Your monthly payment heavily depends on the health of the housing market. If the economy is not doing well neither will your wallet.

What Are The Advantages of Buying a Home?

• You have the freedom to alter your house in many ways. Unlike renting you can make any legal renovations you want.
• You can own any type of legal pet.
• Interest on mortgage payments may be tax deductible unlike rent interest.
• You usually get a larger property size.
• You can choose what appliances you want. You can do things your way and get the latest and greatest washing machine, who knows, maybe its a top loader.
• You may be able to find a mortgage to fit your budget and goals.
• No matter what happens to the market your payments will remain the same.
• Mortgage payments are usually less expensive than rent payments for similar properties.
• You get all of the pride and joy associated with owning your own house. You can do almost anything you want with it.

What Are The Disadvantages of Buying a Home?

• Down payments can be costly.
• You have to do all of the work and maintenance on your own.
• You have to get home owners insurance.
• You will have to pay property taxes.
• Most of the time you will have to buy furniture and appliances on your own.
• You will have a hard time moving. In order to move you will need to find someone to buy or rent your home.

Who Should Rent and Who Should Buy?

Buying a home is the biggest purchase most people will ever make. It is important to make sure you are financially ready for such a large commitment. Buying a home is not the best idea for everyone at every stage of life. Renting has its place.

If you:

• have a good amount of savings
• have stale income
• want to stay in your area for more than two years
• have a good credit score
• have money to put aside every month
• can save up for a down payment + closing costs

Then buying a house may be right for you.

If you:

• do not have stable income
• value mobility
• do not want to make a big commitment
• do not want to take care of your own property
• have a poor credit score
• are trying to save up for a down payment

Then renting looks like it is your best bet.

Arthur Williams

June 23, 2022 (Updated June 24, 2022)