What Criteria Determine If You Should Buy a House?

by Julie McGee 03/01/2020

Photo by Athitat Shinagowin via Shutterstock

You’ll often hear it stated that paying rent is throwing money down the drain. As a motivation to buy a home, however, that might not be the best idea. A rule of thumb is that if you can purchase a home for fifteen times what you currently pay annually in rent, buying makes sense. In real numbers, if your rent is $1,500 a month, your annual rent is $18,000. Fifteen times that amount is $270,000. That means if you can buy a comparable home for around $270,000, it makes sense to buy rather than to rent because you’ll break even in 15 years and will accrue equity beyond that.

But even if housing prices fit that scenario, what is your personal criteria?

Is renting throwing money away?

That depends. There are multiple rent vs. buy calculators online that allow you to plug in the variables that apply to your situation. The adage that it’s always better to buy may not fit into your lifestyle, career goals or plans. Don’t buy just because someone tells you that you’re tossing away your life savings. After all, if you have enough for a down payment, you can invest it in something more liquid than property.

But, buying is a fantastic idea if you love the community, see yourself living there for at least five years, and want to own your home.

There are some guidelines, however, to help you determine if you are ready. These require that you keep financial considerations separate.

  • Do you still have student loans? If so, determine the impact that more debt places not just on your pocketbook, but on your psyche. If having education debt stresses you out, adding more debt to that is not a solution. Instead, before you buy a home, work with a student debt counselor to see if you can make some headway on your loans.
  • Do you have an emergency fund? For some people, if they get a flat tire or the fuel pump goes out in the car, the burden of taking care of that emergency can throw all caution to the wind. Having an emergency fund of a minimum of $1000 for short-term emergencies (car repair, flight to a family funeral, etc.) and three to six months for long-term emergencies (extended illness, job loss) protects you from disasters lurking around every corner.
  • Can you set aside money for home maintenance? If you replace your rent one-to-one with a mortgage (even including taxes, PMI, and homeowner’s insurance), you still need funds for regular home maintenance. Generally, you’ll want to set aside about one percent of the cost of the house minimum for annual maintenance. If you buy your home for $300,000, you’ll need to set aside an extra $250 a month (3% or $750 a month is better) to cover repairs, maintenance, and upkeep of your home.

The other questions you want to answer are: How secure is your job? Could you be moving within five years? Do you qualify for a good interest rate? Buying just to escape renting is never a promising idea. But if the answer to these questions leads you to believe homeownership is right for you, in the right location, and it’s the right time, find the right real estate professional to help you get there.

About the Author
Author

Julie McGee

My Client-First Philosophy

There are many qualities and skills that go into being an excellent real estate professional - integrity, in-depth community and market knowledge, marketing savvy, effective negotiation skills and a high-quality professional network, all of which are hallmarks of how I work.

These skills take years to develop and require continual experience and education. I've been practicing real estate FULL TIME in the Tampa Bay area since 1996 and have established myself as one of the areas top 10%. Time in the business, full time experience working both sides of the Bay and dedication to continued education set me apart from other realtors. My customers receive the highest level of expertise and service with complete confidence that they have chosen the right person for the job!      

As a Tampa real estate professional, I've also found that providing the very best service is essentially about putting my clients first. This means keeping myself accessible, being a good listener as well as a good communicator, and responding quickly to your needs. After 15 years in the business I left corporate first real estate to start my company, Tampa Home Sales, Inc. As a corporate company agent I struggled time and again with their changing policies and added customer fees that were mandated in the interest of the "company" that imposed unnessary financial burden on my customers and inhibited my ability to work with customers in a manner that meets their individual needs. Every buyer and seller has a different set of circumstances and deserves the attention and services that are as individual as they are.         

This "client first" philosophy has always been my approach and it requires me to continually improve my skills and ways of doing business. In addition, I've found that the latest nonproprietary technologies are enabling me to do everything I've always done, only much more quickly and efficiently. They've also helped me to extend the range of services I provide to my clients.

So when you decide that you'd like to buy or sell a home ANYWHERE in the Tampa Bay area; from South Tampa, Hyde Park, Palma Ceia, Harbour Island, Davis Islands, Channel Side, Beach Park, So Ho, Bayshore, Bayshore Beautiful, Golfview Estates, Parkland Estates, MacDill, Carrollwood, Westchase, Seminole Heights, New Tampa, Tampa Palms, Brandon, Valrico, Riverview, Lutz, Land O'Lakes to across the Bay cities of Clearwater, St. Petersburg, Palm Harbor, Safety Harbor, Largo and the Pinellas County Beaches, please contact me. 

I KNOW Tampa Bay!