In the current housing market, many people are considering this age-old question. Is it time to buy a house, or do I need to rent? And the answer is going to be different depending on a host of different factors that are changing all of the time. Let’s look at these factors for the current Northern Virginia housing market.
How Long Will I Be Here?
Did you just get a new job and plan to relocate long-term? Do you have a military position that means you will need to relocate every few years? Do you have a job that requires travel, but need a permanent home base? The length of time that you will be in a location can impact your decision on whether to rent or buy.
Some mortgages come with prepayment penalties that charge you when you pay off part or all of your loan early. According to RocketMortgage, “The first few years of a loan term are riskier for the lender than the borrower. That’s because most borrowers haven’t put down a significant amount of money when compared to the value of the house. That’s why lenders charge you “interest,” which is protection from a financial loss. If you pay the loan off right away, they lose out on all those interest fees which were included in the loan as an incentive to them to give you, the borrower, a loan.”
Amortization
Fixed-rate mortgages are also usually amortized. Amortization is when they calculate a fixed mortgage payment based on the total interest and principal for the life of your loan. Your monthly payment at the beginning of your loan is mostly interest, because the amount of the principal is high. Over the life of your loan, the amount of interest you pay in each payment will go down and the amount of principal you pay will go up. This works well for those who will be in a home long-term, but can be detrimental if you only plan to stay for a year or two. The general rule is to plan on staying in a home for 5 years after you buy.
So deciding to buy a home when you have a job or a life that requires frequent moves, may not be the best option. Renting a home in each short-term location might be.
Do I Have Enough Savings for a Down Payment?
The old adage that you need to save 20% of the price of a home as down payment is just not true anymore. First-time home buyers these days usually pay only around 7%, a much more manageable goal. And many lenders can start a payment plan with a down payment as low as 3%-6%.
There are also other
state and
local homebuying programs that can help home buyers, first-time or not, with a down payment or closing costs. In general, if you can afford rent in Northern Virginia, you should be able to handle a mortgage on a similarly-sized home.
And, recent studies show that the average homeowner has a net worth over
40 times larger than that of a renter! With homeowners having a net worth of approximately $255,000 and renters having a net worth of $6,300, it’s easy to see how buying a home can help you better achieve your long-term financial goals.
Do I Know Where I Want to Buy?
When deciding where to live long-term, you might take a job or decide to move to an area that you are completely unfamiliar with. You might know in general where you need to live, but sometimes that encompasses a huge area, and many different neighborhoods. Especially in the areas around DC! If you have the flexibility, renting a home for six months to a year in a neighborhood or two that you are interested in might be a great way to find your dream home.
Consulting with a local realtor can be a huge advantage. They know the areas and can match you with neighborhoods that fit you and your family. A realtor can also help you find rentals and send you information on homes for sale in the neighborhood. If you fall in love with a neighborhood, living nearby can be the perfect way to be able to jump on your perfect home as soon as it goes on sale. Or, if you decide a neighborhood isn’t a good fit, renting gives you the flexibility to move on.
Is the Market Too Competitive?
In high demand areas like Northern Virginia, the market is usually pretty fast-paced. But, like most of the country, things really ramped up over 2020 and early 2021. Housing shortages became more severe. Bidding wars became more common. But now, in the fall of 2021, and heading into the winter, things
seem to have finally cooled down, closer to pre-pandemic levels.
Having an experienced local realtor by your side can be invaluable in any buying situation, but in fast-paced markets, it is practically a necessity. A realtor will help you know when a home that is right for you is on the market, and help you make a competitive offer. And experience is key when making an offer. You don’t want to compromise on something that might bring you misery down the road.
Conclusion
The decision on whether to rent or buy is deeply personal. So many elements can change what is best for you and your family. Take the time to consider these factors with a trusted local realtor when you consider a move.
If you are considering renting or buying in or around DC, call Geva & Jane! They can help you find the right home and, if you decide to buy, put you in touch with their trusted lenders.
Elizabeth Marcano, Writer for Geva and Jane Real Estate
