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Don’t rush into buying a house if there are good reasons to remain a renter.
Key points
- Homeownership has some advantages, including the ability to build equity.
- Reasons to keep renting include not having enough savings or if you’re working on your credit score.
Buying a home can have huge benefits. You can begin building equity as you repay your mortgage and can eventually own your own place outright. You’ll benefit from rising property values and have much more control over what you can do with your space.
Despite these advantages, however, purchasing a property isn’t the right choice for everyone. Here are six reasons why you may decide that continuing to rent is the best choice — at least for the time being.
1. You don’t have an emergency fund
Before buying a home, it’s important to have an emergency fund set aside. Your emergency fund can help you cover home repairs, which will become your responsibility once you no longer have a landlord to handle them. And it can save you from foreclosure if your income declines.
If you don’t have the money to cover several months’ worth of expenses, you may want to wait until you’ve built up enough in a high-yield savings account before purchasing a property.
2. You haven’t saved up a down payment
The ideal down payment when purchasing a home is 20%. Putting this much down helps you qualify for loans from more lenders and get a better rate. Plus, it can help you avoid having to make an additional monthly payment for private mortgage insurance. This is a fee that protects lenders from losses in case of foreclosure when smaller down payments are made.
Even if you aren’t able to make a 20% down payment, most mortgage lenders require a minimum of 3% to 10% down. So if you don’t have the money saved to put down on a home, you’ll either need to wait until you do or potentially accept a more expensive mortgage from a more limited pool of lenders.
3. Your credit score needs work
It’s possible to qualify for a mortgage with a credit score as low as around 500, but you’ll have a very limited supply of lenders. You may also have to accept a loan with more upfront fees or a higher interest rate.
If you don’t have a …….
