Oct/Nov 2005 To Buy or Not to Buy Knowing when it's Right to Own by Lisa Strickland Maybe it's when you're figuring out your taxes. Maybe it's when you're writing yet another check to your landlord. Maybe it's when you get tired of playing by someone else's rules. At one time or another, most renters have considered owning their own real estate. With Atlanta's rental prices, it's no wonder. If owning your own home is the American dream, how do you know when it's time to take that plunge and become a homeowner? There are hundreds of factors to consider when deciding whether or not to buy a home, but what it boils down to is your lifestyle and financial situation. When you ask yourself some serious questions, your answers may surprise you. Can you handle the commitment? One of the biggest advantages of renting is the short time commitment. If you live in one place and decide it's not for you, it's fairly easy to move when your lease is up or pay a fee to break the lease. Obviously, it's not that simple when you own a home. Aside from the time it takes to sell your home (which depends heavily on the market), if you haven't owned it for very long, it is difficult to break even or make a significant profit. If you're planning on moving or transferring for a job, it may be best to rent initially for the first few months in order to get to know the city better. On the other hand, if you plan on being in the area for at least a few years, buying a home can be a sound investment. Are you ready for repairs? If your air conditioning breaks or your dishwasher has a leak in your apartment, you simply call the property office and the maintenance staff takes care of the repairs at no cost to you. In general, t hese are small inconveniences to renters. As a homeowner, repairs are solely your responsibility. Unless you are a true handyman (or handywoman), as a homeowner, you should have reserve finances to pay for these unexpected bills. In a condominium, you are responsible for everything within the walls, floors and ceilings. In a single-family house, you have the added responsibility of a roof and yard maintenance. "A lot of young people who are first-time buyers making the transition from renting to home ownership choose condos over single-family houses," says Cheryl Mondello, director of sales for Coldwell Banker The Condo Store. "Not only do they love the maintenance-free lifestyle, but many communities now also have a pool, tennis courts, a fitness center, media rooms, libraries, message facilities, personal wine cellars and meal delivery." Can you afford it? This is a loaded question. No doubt you've seen advertisements comparing sample rent and mortgage payments for properties around Atlanta. Unfortunately, it's not that simple. What these ads often leave out are costs for property taxes, homeowners' insurance and homeowners' association dues (for condominium communities), which add to your cost per month. If you're curious about what you can afford, many organizations such as the Fannie Mae Foundation (www.fanniemae.com and www.homepath.com) or the National Association of Realtors (www.realtor.com) offer plenty of tips and online mortgage calculators to figure out how much house you might afford based on your income and savings. Of course, for a true estimate it is best to meet with a mortgage consultant, your financial adviser or tax professional to examine your individual situation. "If you can afford it, it is better to own than to rent because you have a real asset," says Pat Griffin, mortgage loan consultant for Wachovia Bank. "You are building up equity and you can write off the interest you are paying on your loan." With potential loan applicants, Griffin says she looks for stable employment, steady income (as a rule of thumb, lenders figure you can afford about 30 percent of your gross income), savings and checking account assets, good credit and responsible financial history. Is it right for you? Deciding to buy a home is one of the biggest choices you can make. It's not just about whether or not you can afford the payments, but it's also a matter of choosing what fits your lifestyle. Once you examine your finances and weigh the pros and cons of each option, your decision can be clearly based on what is best for you and your individual situation. Renting vs. Owning: Which is Right for You? Renting No responsibility for repairs or maintenance Limited control over property maintenance and design Low initial deposit Rent prices usually increase each year Mobility and flexibility Rent payments benefit the landlord Short-term commitment No tax benefits Owning All maintenance and repairs are your financial responsibility Pride of ownership, freedom to redesign and decorate You usually pay a down payment and closing costs Mortgage payment less likely to increase, depending on loan type You are responsible for selling your home when you move Your mortgage payments are building your equity To make the most of your investment, it is best to own your home for at least two years Your mortgage interest is tax-deductible
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