Buy or rent? It can spark a debate as heated as Coke or Pepsi. Android or iPhone.
Once upon a time, it was common for people to say that owning a home was your best investment. It’s the American Dream. You invest in yourself and your home. You have something to show for it when you move and sell. Renting is just throwing money away.
However, times have changed. In some parts of the country, renting and reinvesting the extra money can outperform owning a home and building equity. It’s better to rent in nearly 60 percent of the country, according to the 2019 Rental Affordability Report from ATTOM Data Solutions.
In the Capital Region, however, rental costs have risen in recent years, and it’s more affordable at this time to buy a home in most locations, according to data by Zillow Group Inc. and presented in the Albany Business Review.
The examples below illustrate the local housing costs that both homeowners and renters face. Values are median by ZIP Code; mortgage and rent payments are monthly.
Albany (ZIP 12210)
Home value: $150,100
Mortgage payment: $757
Rent payment: $1,080
Bethlehem (ZIP 12077)
Home value: $295,700
Mortgage payment: $1,492
Rent payment: $1,946
Clifton Park (ZIP 12065)
Home value: $209,200
Mortgage payment: $1,464
Rent payment: $1,811
Clifton Park (ZIP 12148)
Home value: $339,900
Mortgage payment: $1,715
Rent payment: $1,997
Cohoes (ZIP 12047)
Home value: $208,500
Mortgage payment: $1,052
Rent payment: $1,360
Colonie (ZIP 12205)
Home value: $215,100
Mortgage payment: $1,085
Rent payment: $1,542
East Greenbush (ZIP 12061)
Home value: $238,900
Mortgage payment: $1,205
Rent payment: $1,599
North Greenbush (ZIP 12198)
Home value: $200,400
Mortgage payment: $1,011
Rent payment: $1,395
Troy (ZIP 12182)
Home value: $147,600
Mortgage payment: $745
Rent payment: $1,117
Source: Zillow Group Inc. and Albany Business Review
If you are thinking about buying a home, here are factors to consider.
What can you afford?
Common advice is to spend less than 25% of your monthly income on housing, but there is not a one-size-fits-all answer to this question.
How much money have you saved already?
Are you debt-free, including school loans and credit cards? Do you have an emergency fund?
“Everyone is different, and it depends on individual situations and lifestyles,” said Josh Hebert, Manager of Mortgage Origination at Homeowners Advantage, a subsidiary of CAP COM. “Number one – do you qualify? Number 2 – are you comfortable with the monthly payment and terms. Plus, you consider a person’s experience as a homeowner.”
You can use our new house calculator to determine how much of a mortgage you might be able to obtain.
You usually make a down payment of 10% to 20%, and closing costs, such as prepaid interest, property taxes and insurance, can add 2-5%.
There are also back-end costs when you sell because you’ll probably pay a realtor and make improvements.
If you don’t have money for a down payment, you still have options and a chance to buy your dream home. For homebuyers with a good credit rating, Homeowners Advantage offers 100% Financing options with both fixed and adjustable rate loans.
“We have a variety of options for first-time homebuyers,” Hebert added. “We tailor to them. Getting a mortgage doesn’t have to be a scary process. We’re here to guide you.”
How long will you live in the home?
One of the reasons homes traditionally have been seen as a great investment is that property values usually rise. The housing market crash of 10 years ago serves as a prime example that it’s not always true.
You build home equity because as you make mortgage payments for several years, you enjoy a handsome profit when you sell. In order to realize that equity, you need to live in the home for a period of time. However, there is no standard answer for what that period of time is. It depends on factors such as the neighborhood you selected, how much down payment you made, interest rates and terms of payment.
If you are not sure how long you plan to live in the home, you might opt to rent until you can answer that question.
Taxes and extras
As you estimate expenses, include property taxes, insurance, repairs and maintenance costs. You’re going to want to paint walls, replace door locks, install a garage door opener, add or remove carpeting, etc. If you’ve never owned a home before, budget for tools (ladder, hammer, saw) and perhaps a snow blower, shovels and lawn mower.
Private mortgage insurance (PMI) is often required if you don’t pay 20% down, but you can avoid PMI with 10% down on some Homeowners Advantage loan options.
Types of mortgages
In addition to the traditional 30-year fixed-rate mortgage, there many mortgage options that usually have lower rates, such as 15-year fixed, 20-year fixed and a variety of adjustable rate mortgages.
Homeowners Advantage offers a Community Heroes Mortgage Program ($1,000+ value) that rewards people in the U.S. military (active or veteran), law enforcement, fire and rescue, healthcare, and education.
Homeownership can be satisfying. You have more control over where you live and can create living spaces that reflect your personality and lifestyle. You can’t do that in a rental property someone else owns. You want to paint Yankee pinstripes in your bedroom? OK in your house, but probably not in your rented apartment. Want to take down a wall? Finish the basement? Remove carpet and install tile or hardwood?
Your home is where you make memories with your family, such as playing ball in the back yard, hosting parties, and sitting around the outdoor fire pit in the summer or building snowmen in the winter.
“We look at everyone individually,” Hebert said. “Do you have other debt? What are your goals, your lifestyle? We have that initial qualifying conversation and determine the best options for you. We fit the product to you.”