The decision between renting or buying is less about home prices or rents and more about whether you’re ready to be a homeowner. What does your savings look like after a down payment is taken out?
Financial planner Andrew Dressel likes people to have six months of expenses in an emergency fund, plus enough cash to cover closing costs and moving expenses. The overall cost of owning the home, including the mortgage and utilities, taxes, maintenance of appliances and the expense of everyday wear and tear should not exceed 40% of a person’s take home pay.
Dressel added, “They need to also make sure they are not sacrificing their retirement or other goals just to own a home right now.”
Certified financial planner Leo Marte said people should also strive to be debt-free before buying a home. He shared, “If you are not financially ready, paying rent is essentially buying patience and insurance against homeownership costs.”