Rent Vs. Buy: Six Questions Newlyweds Need To Ask

Love and marriage and then home ownership? The newlywed year is full of milestones including, of course, your first married home together. In many ways, home ownership is still the great American dream and we live in a culture that places a high value on owning a home. It is often a natural step many couples take after tying the knot, but choosing whether to rent or buy is an important decision that needs to be made together. There are some major lifestyle factors that impact that choice.

When you are ready to have a serious conversation about your future home, set up a date with each other either at home or in a place where you can talk quietly and at length. Turn off your phones and other distractions so that you can truly focus. The six questions below are conversation starters to help you evaluate whether or not now is the right time for you to look at buying a home.

1) Where do we see ourselves in the next five years? If you are planning to move to another state, graduate from school, or change careers soon then you may want to rent for a time to give yourself flexibility when the time comes to make a move. Buying a home and keeping it until it appreciates in value is a way to increase your personal wealth but having to sell a home quickly can result in decisions that could cost you money in the short term.

2) Is our credit in good shape? In the last post in this series we talked about coming clean with your partner about your credit status and getting recent credit reports. If you’ve done this you should know where you both stand in terms of credit scores and debt. Home ownership provides attractive tax benefits. People who take out mortgage loans to buy homes can deduct the points paid to obtain a mortgage when they bought their home and they also may deduct mortgage interest payments and property taxes each year.

3) Can we afford the overall expense? Many young couple use some of their wedding gifts or a loan from their parents to float the down payment but there are other expenses to consider as well. You’ll need to have an emergency fund set up for home repairs and include monthly maintenance into your budget. You will also have property taxes and insurance to consider.  On the plus side, your house payment will be a consistent number unlike rent which can be subject to dramatic increases.

4) How is the market where we want to live? Despite the advantages, buying a home is a major financial decision that shouldn’t be taken lightly. If you are buying in a market where real estate prices run in cycles, the timing of your purchase will be very important. If you buy during a rising price bubble, the value of your home could plummet when that bubble bursts. Also when there is low inventory and the prices are rising, it can be tempting to pay more for a home because it seems like the market will soon escalate out of your reach. The most recent survey from mortgage-finance company Fannie Mae showed that now over half of Americans believe real estate prices will continue to rise. When you are considering buying, take a look at not just where prices are now but where they have been over the past few years.

5) What’s our exit strategy? If you do decide that you want to move to another home will you try to sell first and move up? That can be a challenge depending on the market. If home prices drop below the amount you owe on your mortgage, you won’t be able to sell at a profit until values rise. If you have to relocate and can’t sell quickly you may need to rent the home for a time.

6) What’s our lifestyle? Are you homebodies or party animals? Do you like to entertain? How do you feel about home maintenance– will you be avid do-it-yourselfers or will you hire help? Knowing what you are willing to do to maintain the home is an important part of the decision process. Owning a home means tending the yard, keeping up with repairs, and regular trips to the local hardware store. Making the transition from being a renter whose first call is to the landlord, to a homeowner who needs to troubleshoot the problem, can be startling.

Once you’ve answered these questions, it’s time to get to the hard numbers. Start browsing realtor.com® to get a sense of the options in your area. This should give you a sense of the options in your area. Once you have a better idea of the price of the type of home you want, use the realtor.com® Rent vs. Buy calculator. This calculator will help you to compare the costs of renting to the costs of buying a home. It takes into account a variety of considerations such as property taxes, appreciation of homes in your area, and the current interest rate for savings in order to help you forecast the net effects of all the hidden forces so you can make an informed decision.

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Emmet Pierce contributed to this article.