How To Decide Whether To Buy Or Rent A Home
The rain thrashed our office windows hard one February Friday in San Francisco. The weatherman encouraged us to stay in and avoid the roads if we could. Most people would be glum, but not my friends and I. Rain during the winter in SF means lots and lots of snow in Lake Tahoe! My buddies and I decided to take a 2.5 hour drive up to Sugar Bowl and hit the slopes that Saturday. A total of 2 feet of fluffy powder fell overnight and we were in snowboarding heaven!
When we returned that evening, our legs were sore but our faces beamed with smiles as we reminisced our daring jumps off of several of the steepest slopes. We had no fear because the landing zone was soft. The very next day in SF, the sun was beaming down a warm 76 degrees and we decided to play some tennis at the local park. It was that exact moment when I knew that San Francisco was the place I wanted to live for as long as possible. Months later I bought my first place.
BUYING A HOME IS NOT ABOUT THE MONEY
Knowing when to buy a home is not so much about one’s finances. Everybody knows that you should follow my 30/30/3 home buying guideline where you have 30% of the value of the home saved up in cash, spend no more than 30% of your monthly gross income on the mortgage, and pay no more than 3X your annual gross salary for a home. That is obvious. You aren’t some horny teenager who can’t keep it in his or her pants and buy as soon as a bank says you can. You’re a full-fledged adult who knows the basics of personal finance.
The most important factor in deciding whether you should buy a home is whether you love the environment you are in, and can see yourself living there for years. In addition, you’ve found a career or entrepreneurial endeavor you enjoy. Ask yourself this main question: If you were forced to live in your current location for 10 years, would you be happy, OK, or frustrated? If the answer is ‘happy’, you have yourself a winner.
HOME BUYING IS REALLY THAT SIMPLE
The key to wealth is simply being in the game for a long enough period of time. Larry accumulated $5.7 million in his 401K because he invested for 35 consecutive years at his firm. It’s the same thing with owning a home. Thanks to inflation, and an ever increasing population, if you buy a house and live there for 20-30 years, you are most certainly going to come out fine. And if nothing else, after 20-30 years, you’ll have a nice little asset to call home, where you can live rent free.
After three years of saving and investing all my money after college, I was sick of renting. I didn’t want to spend more than $2,000/month on a nice one bedroom, and the rental stock really is inferior to the ownership stock here in San Francisco There’s no point in making money if one doesn’t spend it on things that improve the quality of your life.
I knew very well after that glorious weekend that San Francisco was the place I could see myself living for the rest of my life. I had already lived in five different countries, studied abroad in three others, and visited 23 more up until that point, and I just knew I had found myself a winner. Nowhere combines the weather, job opportunities, culture, food, nightlife, and great outdoors like San Francisco.
LIFE IS HOW YOU LIVE IT
Deciding on buying a home is like deciding on a relationship or a marriage. You just know at that point in time, s/he is the person you want to spend the rest of your life with. If you are unhappy or uncertain with your career, haven’t explored enough places, and still don’t know what you want to do in life, renting is an absolutely fantastic choice. If you do happen to know early on what you want to do and where you want to live, then by all means go for it.
Recommendations For Protecting Your Assets And Saving Money
* Make sure you refinance your mortgage. If you haven’t refinanced your mortgage in the past 6-12 months, I strongly suggest you at least check the latest rates online with Quicken Loans, the largest online mortgage retailer. They were founded by Dan Gilbert, also owner of the Cleveland Cavaliers. Because they have the largest online network, they can provide the lowest rates. They also seem more streamlined in the refinancing process than traditional bricks and mortar banks as well. Interest rates are at all time lows and won’t stay this low forever with QE tapering in the near future. My latest refinance was for a 5/1 jumbo ARM at 2.625% from 3.125%. Might as well check because it’s free and there’s no obligation.
* Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance! The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is? If you don’t want the credit monitoring service, simply cancel before the grace period is up.
* Get the best home insurance possible. In order for your property to grow in value you must protect your property from damage. Fires, floods, leaks happen all the time. If you have cut-rate insurance, you could very well pay way more than you should. Maintenance costs add up over time. I highly recommend USAA for all your property and auto insurance needs. USAA was founded in 1922 to serve our honorable servicemen and women and have since opened up to the public to provide the absolute best service and some of the best rates. Not only do I have my home insurance with USAA, I also have an umbrella policy as well as three CDs totaling roughly $500,000 with the company. I’ve been a client for over 20 years given my father served in Vietnam and I’m a huge fan.