Advice on buying a house instead of renting?

Question

Houses in the cleveland area are going for dirt these days. I am a recent engineering grad, i have 65k in debt, and i am either going to rent an apartment, or buy one of these cheap houses and fix it up. I am not concerned with making a profit on the house, only cheap monthly payments. I can either A) rent a place at about $550 a month, or B) purchase a house for about 25-35K. A mortgage at this price would be cheaper than rent, and i would be building equity. I have a decent entry job (45k annual), great credit, and could provide a 10% DP on the house at that price.

what would you do, rent or buy? (i am 24) keep in mind all of my debt.

Answer 1

assuming you can get financing, I think the important consideration is which way you think prices in the neighborhoods you are looking at are going.  If they are still on the downward slide, you have to consider how long you plan to live there.   I'm guessing you may be unhappy in the kind of neighborhood you are describing after a year or two, and if prices have not hit bottom yet, you might get stuck with a house that isn't worth what you paid for it.

Answer 2

It is always better to buy than rent. If you rent, just think of all those rent payments adding up. This can go towards your mortgage and you own something. By renting, you are paying someone else's mortgage.  

Answer 3

you won't be building any equity with the value of the house declining.  prices will continue to drop for the next year or two.  in the meantime you need to get you debt paid off, you should owe nothing at your age.  (i would be surprised if anyone would give you a loan anyway)

Answer 4

sure if you feel you can make those payments by all means buy instead of renting renting is throwing money down the drain. you can buy and in 30 years you can sell it or whatever you have one paid for. its great ot have home paid for i know. you can also after 10 years maybe move up to more expensive home if you sell and stuff but yes buy and go od luck

Answer 5

If it's cheaper to buy, then go for it...  your interest payments on the mortgage and tax deductible.  You seem to already see that it makes sense. If you are just worried about debt in general do what most successful people do, put 10% of your income towards debt payoff (in addition to the 10% you save and the 10% you give to charity) so you would have to live off 70% of your take home pay.  That's the money success formula!!

Answer 6

Buy. Definitely buy. It will be yours. Why pay someone else's mortgage by renting?

I've bought/sold five houses in my lifetime, and it's always been win win win. My mortgage is cheaper than rent, I get to deduct certain expenses, and it's great for credit history. You don't get any of this with renting.

If you find that times get rough financially, you can take on a roommate or even rent out the whole house, and rent your own apartment for yourself.

Answer 7

it is not always better to buy than rent. there are millionaires in Manhattan that rent, they know something. Remember, you may be building equity but VERY little in the first 10 years. Pull an amortization schedule and see how much your paying in principal and interest. You are also paying for taxes, insurance, utilities including water, and repairs. I found that when I added all this up, I was paying more than my rent and these are things you don't get returned. Most off, you cant just walk away if times get tough or prices continue to plummet. you're stuck with it until you can sell it. It's a nice tax write-off but not always worth it. Buying makes most cense when you know home values will increase and your can make money when you sell. If not it can be very stressful sitting on a mortgage that isn't even worth the value of the home. I rent in Chicago, stress free and so much easier. I would not want to be one of those thousands who bought in the past two years and are stuck with a mortgage of an inflated home price.

Answer 8

I have to disagree with the person who answered before me. Renting doesn't always mean you are throwing money down the drain. Buying a home is a purchase that can and will affect your life. You must be able to handle the payments and all of the financial responsibility that comes with it. I'm not trying to scare you -- but answers like that really chap my hide because people (especially young folks) think that you must buy a home and therefore they put themselves in a bad place financially. For instance, look at the market right now - now would you say owning a over mortgaged home (with the possibility of it being foreclosed on) or renting a home is throwing money down the drain?

I'm not advising one way or another but when you purchase a home you need to look at the whole picture. Also, I'm not sure if the loan companies offer loans that low - you'll have to shop around.