RENTING VS. BUYING A HOME: WHAT YOU NEED TO KNOW

The greatest question in real estate is whether should you rent or buy a home. There is truly no right or wrong answer. It all depends on your lifestyle preference and what you are looking for long-term! But let’s compare and contrast renting vs buying a home.

Renting vs Buying: What are the upfront costs?

When you buy your home…

Down Payment 

Your down payment is the percentage of your home being paid upfront. This can range anywhere between 3% to more than 20%. Additionally, a down payment can vary depending on your credit, lender, and market conditions. 

Home Appraisal

The lender will schedule a home appraisal to ensure the value of your home. This will be an upfront cost ranging between $300 to $500 before the loan is approved.

Home Inspection

A home inspection will completed to ensure the home you are purchasing is intact. The cost for a home inspection is also around $300 to $500.

Property Taxes

Truly, there is no proper estimate on the amount of property taxes you will need to pay, especially here in Dallas. The Dallas market conditions can vary between cities that are only 15-30 minutes away from each other. Property taxes are dependent on your specific market and the timing of purchase. This is also why it is a good idea to keep up with any market changes when you are thinking about starting the process of buying your first home.

Home Insurance

Your home insurance is dependent on a variety of things such as credit, value, location, and the style of the home. This is an additional lender requirement before closing is finalized. The first year of home insurance typically must be paid upfront, but you can ensure you get the best quote using Policy Genius. 

Additional Closing Costs

It is always a good idea to keep a little bit more in your budget than you intend to spend. This way no additional costs sneak up on you once you get to the most exciting part of the process, the closing!

What are the recurring costs?

  • Mortgage: The payment that goes towards your home every month 
  • Loan Payments: This monthly payment goes towards your loan interest 
  • Property Taxes: Can be paid once a month to once or twice a year. The average property tax rate in Dallas is 1.7%
  • Insurance: This can average out to $1,500 a year, however, this can vary from year to year
  • Maintenance: If you have plumbing, roof, or foundation issues in the future this is something the homeowner is responsible for depending on the home’s insurance
  • Utilities: This is your typical water, electric, and trash pickup monthly billing

The Good News:

You are the owner!

That’s right, every monthly payment you make is one step closer to making this property 100% yours. It is very common for people to first rent a home in order to save for a down payment and eventually own a property. 

Home freedom 

Since this is YOUR home, you have all the creative freedom to make it whatever you desire. Any and every renovation is yours to make. Many homeowners also enjoy turning their home into an investment property. This can mean turning your home into an Airbnb or renting the property out to someone trying to save for their own home one day. 

Taxes

Owning your property can benefit you when it comes to filing for your taxes. However, homeowners will qualify for different benefits across the board. This typically depends on your location, loan, and state laws. If you are considering becoming a Dallas homeowner, you can find more information at Texas.gov.

Buyer Lifestyle

 If you are considering buying a home, here are a few lifestyle traits to keep in mind:

 You plan on staying there for more than a couple years

  •  You want to build equity 
  •  You want the freedom to renovate
  •  You want the stability and sense of belonging in your community

Renting vs Buying: What are the upfront costs?

When you rent your home…

Security Deposit

Similarly to renting an apartment, your landlord will require you to pay a security deposit to protect the property from any damages during your lease. This cost can be up to 1.5 times your monthly rent. 

First Month Rent

Your first month’s rent is typically required to be paid upfront. This can vary depending on what day out of the month you choose to move in. In this case, most landlords will accept a prorated payment. 

Pet Deposit

You will (more than likely) be asked to pay a pet security deposit. This may be non-refundable depending on various conditions. 

What are the recurring costs?

Monthly Rent

Your monthly rent will depend on the location, property, and market conditions. However, everyone needs a place to live, don’t look at this monthly payment as “throwing away money.” Most people believe this solely because it is not building equity. However, many individuals choose to rent because they are getting out of debt or saving for a solid downpayment, and that is an investment in itself.

Pet Rent 

You will more than likely be asked to pay an additional amount towards your monthly rent if you have pets. This will depend on your landlord but can be anywhere around an additional $10 to $50 per month. 

Renters Insurance

Insurance is a must whether you choose to rent or buy. However, monthly renters insurance is a lot less than home insurance, averaging out to be around $15 a month. 

Utilities

Your utilities may be included within your monthly rent. However, this is situational depending on the landlord, tOtherwise, the utilities you pay while renting a home are going to average around the same amount as if you were to own the home.   

The Good News

Less Responsibility

When it comes to any maintenance issues such as roofing and foundation, you can have peace of mind that the responsibility to fix it is not yours. These maintenance issues will be repaired by your landlord at no cost to you.

Mobility

If your job requires you to relocate, or you have the desire to take a few months to travel, it is much easier when you are renting a home. When you rent a home you do not have to worry about preparing to sell and the selling process itself. This can all be very time consuming and slow down the moving process. 

Renter Lifestyle

If you are considering renting a home, here are a few lifestyle traits to keep in mind :

  •  You plan on staying there for less than a couple years
  •  You want to save for a solid down payment
  •  You want the freedom to move in the future
  •  You want to better your credit history

Whether you rent or buy your next home, they are both great options that will benefit you best depending on your current lifestyle. The choice may not always be easy, but we hope this article helped get a better idea of the differences between the two.

Renting vs buying a home is not always an easy house. However, if you are in the Dallas area and want to ensure you are making the best financial decision, The Sharma Group offers FREE consultations to help you find your dream home. 

  • The Sharma Group

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