With the increasing rent rates, you could be thinking that owning a home is more affordable than renting one. However, how true is this? As the prices of homes continue to rise, do the dollars and cents add up in your favor?
Everyone knows that renting is a safe option as it comes with near-term predictability. All you have to do is follow your lease so that your housing costs for the month can be accounted for. You can write a check and go on living safely in your rented home. However, when it comes to owning a home, you might have to pay more for maintenance, random repairs, and may even get blindsided by the increasing property taxes. So, should you rent a house instead of buying one?
Experts say that owning your home is more affordable than renting one. In fact, according to an affordability report, it is more affordable to own a median-priced home that has three bedrooms rather than renting it out. This is because even though the median price of homes has increased in the past year, the average rent has increased even more.
Why is Owning Your Home More Affordable than Renting One?
In most parts of the US, the prices of homes continue to rise more than rents and wages. Despite this rise, homeownership is still more reasonable. Mortgage rates have decreased to below 3 percent, which means that even though the prices of homes are rising, they are still affordable.
Even though it may be startling, there is no denying that the cost of renting a house has been more than the cost of homeownership in recent years. Homeownership and the housing market are mainly affected by the declining interest rates. Even though there is a lot of uncertainty attached to the upcoming year, especially with no end to the Coronavirus pandemic, one thing is certain- owning a house is a better option for those who can afford it.
If you are looking to own a home, here are a few things you can do to increase the likelihood of receiving a mortgage:
Build a Fool-Proof Credit Score
When you need a house loan, one of the first things that the authorities will look at will be your credit score. This will also help you get the most competitive mortgage interest rate in the market.
At the very least, you need a score of 620 if you want to receive a conventional loan. However, if you want the best rates, we would recommend increasing your score to more than 700. To do this, all you have to do is pay your bills on time, ensure that there are no mistakes on your credit report, and pay most of your credit card debt off.
Don’t Be in Too Much Debt
Mortgage lenders do not feel comfortable giving loans to those who have taken a number of loans in the recent past. Hence, it is recommended that you lower your credit card balances and existing loans before you ask for a home loan, especially if you are looking for a big one.
Even though you might not be able to get rid of all your debt, try to pay off a few. For example, strike off a financial obligation, such as paying off your car a couple of months early so that your mortgage lenders can feel confident giving you a home loan.
Get a Steady Job
Lenders want to know whether you will be able to follow a schedule of monthly payments once you receive a mortgage loan. If you have a steady source of income on your application, they are more liable to approve the loan.
In case you are self-employed and earn a varying income each month, it is best to create a steady line of contracts. This will help prove to the lender that you have a guaranteed source of income and will not flake on the monthly loan payments.
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