Do I Rent or Do I Buy?

Renting versus buying often comes down to whether or not you can come up with the upfront down payment or closing costs for the purchase of a home. But there are other financial and time considerations to also keep in mind. Do you want to live in a desirable location, but don't want to pay the huge sums of money required to buy in that neighborhood? How flexible do you need to be for new job opportunities? Moving is much more expensive and time consuming when it includes selling a home.

First, review your credit score and the costs associated with a home loan. The higher your credit score the easier it is to shop for a home loan. The lowest interest rates are available to borrowers with credit scores of 760 or better. Lower credit scores will likely result in higher interest rates and higher fees.

Next, research the area you are interested in living and determine the market prices for purchasing and for renting. Take a look at the rent as a percentage of the purchase price. For example, if the rent is $2,500 per month, you are spending $30,000 a year or 6 percent of $500,000. So if the house costs less than $500,000, it's a decent buy.

After all the numbers are analyzed there are other considerations to keep in mind:

• Community and Security. If establishing yourself into community and/or building equity in your home is important to you, than purchasing might be a better choice. Keep in mind that owners also have to meet property tax and Home Owner Association (HOA) fee obligations.
• Home Maintenance. If you don't enjoy spending time on home or yard maintenance, renting might be a better option. Keeping up with home and yard projects take a significant amount of time and investment.
• Flexibility. If you are planning to move to follow job opportunities, renting provides much more flexibility than purchasing. This is true particularly in geographies where it might be difficult to sell a home.

Having a clear understanding of the financial and time commitments required to own a home is important. Think about your priorities, do you want to have extra time for friends and family? Is it important to be able to move quickly to follow job or business opportunities? Including more than just the upfront payments and real estate commission fees in your decision will help save you time and money.