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Is it cheaper to buy than rent?

[Aug 31, 2011.]

 

According to Trulia's Summer 2011 Rent vs. Buy Index, homeownership is less costly than renting in 74 percent of major U.S. cities. Trulia compared the cost of buying and renting a two-bedroom apartment, condominium or townhouse in the 50 American cities with the largest population.


The top five cities in which buying is cheaper than renting are Las Vegas; Detroit; Mesa, Ariz.; Fresno, Calif.; and Arlington, Texas. Renting is the better deal in New York City; Fort Worth, Texas; Omaha, Neb.; Seattle; and San Francisco.


Low mortgage rates, lower home prices and plenty of homes on the market have tipped the scale toward buying in many areas. A shortage of rental properties and higher demand for rentals has added to their cost.


Consider the following factors when making your personal decision about buying or renting:


How long am I going to stay in this location?


Even if buying is cheaper in your area, you should plan on staying in a home for at least five years before selling in order to recoup the costs of the purchase and build equity. In many markets financial experts recommend staying in your home for seven to 10 years.


How much can I borrow for a mortgage?


Your first step if you want to take advantage of more affordable home prices is to consult with a lender, who can tell you the maximum amount you can borrow. Your loan amount will be based on your income, your monthly debt payments compared to your gross income, your credit history and your assets, along with current mortgage rates.


How much mortgage can I afford?


The amount you can afford may be a little different than the pre-approval loan amount that a lender provides, because you should decide for yourself your comfort level with a mortgage payment. A mortgage loan payment calculator can give you an idea of what monthly payments will be for different interest rates and loan amounts.


How much cash do I have?


You will need savings to make a down payment and pay closing costs, but you should also realize you will need money for moving expenses and to keep in reserve for emergencies including home repairs.


Am I ready for the responsibility of homeownership?


Buying a home is an emotional choice as well as a financial one. You should be ready to commit to a community and a property before you buy and be ready to spend time and money maintaining your home and improving it so that it holds onto its value.


A rent or buy calculation should be done with your head and your heart. For home loan options in your area, go here.

 

About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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