Rising home prices and rising interest rates may have some Californians convinced that they should buy sooner rather than later. However, the cost of a home itself isn’t the only factor one should consider when deciding whether to buy or rent. As a general rule, buying is right for those who have a stable job and are confident that they will have a reliable income for several years to come.
They should also be confident that they have enough money to handle costs such as paying a Realtor or other closing fees. As these expenses can be relatively high, those who want to buy a home should commit to living there for at least five years. Generally speaking, it’s wise to keep expenses such as student loan debt or auto loan payments to less than 30 percent of one’s income.
If a person’s debt-to-income ratio is higher than that, it could make more sense to rent. The same is true if an individual doesn’t have a lot of money saved up. Furthermore, someone who is looking to buy a home wants to be sure that he or she gets the most value for their money. This can prevent a person from being house poor, which means that they are constantly on the brink of losing the property.
Buying residential property may be an effective way to build equity as well as provide more living stability. Prior to closing on a home purchase, it may be a good idea to talk with a financial adviser. This person could review the terms of the purchase and how it could impact a buyer’s financial plan. An attorney may be helpful in reviewing the home purchase contract.