Should you buy or rent?

If you’re already renting, you know it comes with some benefits:

• Renting can be easier for shorter stays
• Upfront costs are often lower than purchasing a home
• Total cost may be more fixed from month to month since you don’t have to cover repairs, not taking into consideration rent increases
• When the air conditioner or heater goes out, it’s not your responsibility

Owning a home comes with its benefits:

• You can build equity in your home over time, strengthening your financial position
• Decorate, remodel and landscape to your liking
• If you have a fixed-rate mortgage, you’re not at the mercy of rent increases
• There may be tax benefits, such as deducting loan interest or property taxes¹
• Owning can come with more living space and privacy

It comes down to your preferences, priorities, finances and how long you plan to stay in your rental or a home you’d buy.

Get started by asking yourself these questions.

Am I financially ready for upfront costs and homeownership costs?

When you think about buying, consider upfront costs and long-term expenses.

A down payment of 10% or 20% can make homeownership feel unachievable. Don’t give up yet. You may be able to put down as little as 3%-5% of the purchase price, paying private mortgage insurance (PMI) until you’ve reached 20% equity. There are also some government-backed loan options that may let buyers put 0% down.

There are some other upfront costs, such as appraisals, inspections, recording fees, taxes and more. Sometimes these can be included in your mortgage loan.

And once you’re in a new home, expenses extend beyond the mortgage payment. Routine maintenance and unexpected repairs are just a couple of the costs to factor into your budget.

You’ll want to set a savings goal for a down payment and homeownership costs. And, set a budget that takes ongoing home maintenance into account. A mortgage lender can help with both!

How’s my credit?

It’s a smart move to get to know your credit score before house hunting. Request a free copy of your credit report from AnnualCreditReport.com. Review your report for accuracy and dispute any errors. You’ll also get insight into factors that may have a negative impact on your credit health.

At The Bank of Missouri, our mortgage lenders will review your credit report with you. We’ll help you understand your score and possible steps that may impact it. Start getting familiar with your credit score as early in your financial journey as possible. This gives you time to address concerns before applying for loans, home or otherwise.

Is debt putting the squeeze on my finances?

Your debt-to-income (DTI) is another number to know when applying for a home loan. Simply put, it’s a ratio of how much you owe and how much you make. Too much debt may prevent you from qualifying for a home loan or limit your options, even if you have good credit.

Another reason to know this number - High DTIs leave little room to pay for the costs of homeownership.

If your debt load is high in comparison to your income, make a plan to shift that ratio. It may mean there is some debt you want to pay off before you buy.

Exact calculations and requirements vary, but having a DTIs that exceeds 45% lowers the likelihood of being approved for a home loan. There’s nuance to what is included and how the number is calculated. Let your lender help.

If you're deciding whether to rent or buy, one of the best things you can do is talk with a lender early. Even if you aren’t sure you want to purchase or feel years away from it being possible, you can still benefit from a conversation. Talk through the pros and cons of renting vs buying. If homeownership is a future goal, a lender can help you create a plan to get there. Setting a savings goal can put a timeline to the homebuying process. And starting early gives you time to make adjustments to your credit score, debt load and more. Our friendly team is ready to answer your questions.