Buying Vs. Renting a Home: What to Consider - NYCM Insurance Blog

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Oct 2, 2023

Buying Vs. Renting a Home: What to Consider

Choosing whether you are going to rent or purchase your next home is a life changing decision. Not only will this decision affect your lifestyle, but it will likely also affect your overall finances. Owning a home may be a lifelong goal, but renting does have its advantages, especially in today’s economy and housing market. There are many factors that go into making this decision for yourself and your family. Continue reading to learn more about how deciding whether renting or buying a home will be right for you.


Crunch All of the Numbers

Your Budget

The first and most important step in deciding whether or not you are going to purchase a home, is determining whether or not you can afford it. If you have not done so already, you’ll want to create a budget outlining all of  your current expenses. Additionally, you may want to consider reviewing your emergency fund to ensure that the possible increase in living expenses will be covered. If it would not be covered, we would recommend saving for three to six months’ worth of an emergency fund including the potential increased expense, before moving forward.


Credit Score and Debt-to-Income Ratio

Once your budget is set and your emergency fund is saved, you will want to start reviewing things like your credit score and debt-to-income ratio. It should come as no surprise that the higher your credit score is, the better off you’ll be when it comes to getting approved for a mortgage. The higher your score, the lower your interest rate can be. If you have a low credit score, it is a good idea to hold off on a purchase until you are able to raise it, as it may be harder to get approved for a loan and your interest rate may make monthly payments unattainable. Your debt-to-income ratio (DTI) is another factor that lenders will be looking at. This number is the percentage of your gross monthly income (before taxes) that goes to debt payments. These types of payments can include anything from credit card debt, to auto loans, and even insurance premiums. According to, a good debt to credit ratio is anything that sits under 38%, although they recommend that you get it as low as possible. 


Your Down Payment and Closing Costs

For many years, it was expected that you pay at least 20% of the purchase price of the home as a down payment. These days, it is possible to pay as little as 3% of the purchase price, depending on the type of loan you apply for. The trade off to paying less down is  that you will be taking on more debt. Along with saving for your down payment, it’s important to know that there will likely be closing costs to pay that are not a part of your down payment. Depending on the type loan you apply for and the contract between you and the seller, you may not need to pay these costs upfront. You will want to discuss this with your potential lender early on so that there are no surprises. Studies show that on average, closing costs tend to run between 2% and 5% of the purchase price.


After you have reviewed your budget, have a good standing credit and DTI, as well as the requisite amount of cash saved, you may be in a good position to start considering a home purchase. That being said, there are other factors to consider before moving forward.


Consider Future Wants and Goals

The decision whether to rent or purchase a home should not be taken lightly. A few questions  you’ll want to ask yourself might include : “Where do I see myself in the next five years?” “What are my long-term goals?”  The answers to these questions can help align your choice.


You would always have the option to sell a home if needed, or to buy out of your current lease, however if you can avoid spending time, money, and stress on a choice that you aren’t sure about, it makes sense to do so. If you know that you plan on being in a specific location for five years or more, purchasing a home may be the best option for you. If you are someone who likes to be spontaneous or live a more nomadic lifestyle, renting may be a safer bet.


Weigh the Pros and Cons 

There is no “one size fits all” option when it comes to choosing your next home. The right choice for you is going to depend on your budget, the current housing market, the size of the space you are looking for, the location and more.


Additional items to consider when weighing the pros and cons of your potential new home may be; the proximity to friends, family, grocery stores, school districts, as well as any additional living costs associated with either choice. Are you not very handy? Renting would leave many areas of maintenance to your landlord., and likely out of your pockets. Prefer to build equity if possible and don’t mind general upkeep? Buying a home might be more for you.


When it comes to renting or buying a home, the choice may not be immediately clear. Be sure to keep a level head throughout the process and avoid being easily persuaded either way. The choice needs to make sense for you in the long run. Whether you’ve decided to rent your next home or purchase, something you can’t afford to go without is insurance. For more information about an insurance policy  with NYCM, check out the link below to contact one of our local agents.