October 5, 2022

Buy Now or Rent Longer?

5 Questions to Answer Before Purchasing Your First Home

Deciding whether to jump into the housing market or rent instead is rarely an easy decision – especially if you’re a first-time homebuyer. But in today’s whirlwind market, you may find it particularly challenging to pinpoint the best time to start exploring homeownership. 

 

A real estate boom during the pandemic pushed home prices to an all-time high.1 Add higher mortgage rates to the mix, and some would-be buyers are wondering if they should wait to see if prices or rates come down.

 

But is renting a better alternative? Rents have also soared along with inflation – and are likely to continue climbing due to a persistent housing shortage.2 And while homebuyers can lock in a set mortgage payment, renters are at the mercy of these rising costs for the foreseeable future.

 

So, what's the better choice for you? There’s a lot to consider when it comes to buying versus renting. Luckily, you don’t have to do it alone. Reach out to schedule a free consultation and we'll help walk you through your options. You may also find it helpful to ask yourself the following questions:

 

 

  1. How long do I plan to stay in the home?

 

You'll get the most financial benefit from a home purchase if you own the property for at least five years.3 If you plan to sell in a shorter period of time, a home purchase may not be the best choice for you.

 

There are costs associated with buying and selling a home, and it may take time for the property’s value to rise enough to offset those expenditures.

 

Even though housing markets can shift from one year to the next, you’ll typically find that a home’s value will ride out a market’s ups and downs and appreciate with time.4 The longer you own a property, the more you are likely to benefit from its appreciation.

 

Once you’ve found a community that you’d like to stay in for several years, then buying over renting can really pay off. You’ll not only benefit from appreciation, but you’ll also build equity as you pay down your mortgage – and you’ll have more security and stability overall.

 

Also important: If you plan to stay in the home for the life of the mortgage, there will come a time when you no longer have to make those payments. As a result, your housing costs will drop dramatically, while your equity (and net worth) continue to grow.

 

 

  1. Is it a better value to buy or rent in my area?

 

If you know you plan to stay put for at least five years, you should consider whether buying or renting is the better bargain in your area.

 

One helpful tool for evaluating your options is a neighborhood’s price-to-rent ratio: just divide the median home price by the median yearly rent price. The higher the price-to-rent ratio is, the more expensive it is to buy compared to rent.5 Keep in mind, though, that this equation provides only a snapshot of where the market stands today. As such, it may not accurately account for the full impact of rising home values and rent increases over the long term.

 

According to the National Association of Realtors, a typical U.S. homeowner who purchased a single-family existing home 10 years ago would have gained roughly $225,000 in equity — all while maintaining a steady mortgage payment.6

 

In contrast, someone who chose to rent for the past 10 years would have not only missed out on those equity gains, but they would have also seen U.S. rental prices increase by around 66%.7

 

So even if renting seems like a better bargain today, buying could be the better long-term financial play.

 

Ready to compare your options? Then reach out to schedule a free consultation. As local market experts, we can help you interpret the numbers to determine if buying or renting is the better value in your particular neighborhood.

 

 

  1. Can I afford to be a homeowner?

 

If you determine that buying a home is the better value, you’ll want to evaluate your financial readiness.

 

Start by examining how much you have in savings. After committing a down payment and closing costs, will you still have enough money left over for ancillary expenses and emergencies? If not, that’s a sign you may be better off waiting until you’ve built a larger rainy-day fund.

 

Then consider how your monthly budget will be impacted. Remember, your monthly mortgage payment won’t be your only expense going forward. You may also need to factor in property taxes, insurance, association fees, maintenance, and repairs.

 

Still, you could find that the monthly cost of homeownership is comparable to renting, especially if you make a sizable down payment. Landlords often pass the extra costs of homeowning onto tenants, so it’s not always the cheaper option.

 

Plus, even though you’ll be in charge of financing your home’s upkeep if you buy, you’ll also be the one who stands to benefit from the fruits of your investment. Every major upgrade, for example, not only makes your home a nicer place to live; it also helps boost your home's market value.

 

If you want to buy a home but aren’t sure you can afford it, give us a call to discuss your goals and budget. We can give you a realistic assessment of your options and help you determine if your homeownership dreams are within reach.

 

 

  1. Can I qualify for a mortgage?

 

If you’re prepared to handle the costs of homeownership, you’ll next want to look into how likely you are to get approved for a mortgage.

 

Every lender will have its own criteria. But, in general, you can expect a creditor to scrutinize your job stability, credit history, and savings to make sure you can handle a monthly mortgage payment.

 

For example, lenders like to see evidence that your income is stable and predictable. So if you’re self-employed, you may need to provide additional documentation proving that your earnings are dependable. A lender will also compare your monthly debt payments to your income to make sure you aren’t at risk of becoming financially overextended.

 

In addition, a lender will check your credit report to verify that you have a history of on-time payments and can be trusted to pay your bills. Generally, the higher your credit score, the better your odds of securing a competitive rate.

 

Whatever your circumstances, it’s always a good idea to get preapproved for a mortgage before you start house hunting. Let us know if you’re interested, and we’ll give you a referral to a loan officer or mortgage broker who can help.

 

  Want to learn more about applying for a mortgage? Reach out to request a copy of our report: “8 Strategies to Secure a Lower Mortgage Rate”

   

 

  1. How would owning a home change my life?

 

Before you begin the preapproval process, however, it’s important to consider how homeownership would affect your life, aside from the long-term financial gains.

 

In general, you should be prepared to invest more time and energy in owning a home than you do renting one. There can be a fair amount of upkeep involved, especially if you buy a fixer-upper or overcommit yourself to a lot of DIY projects. If you’ve only lived in an apartment, for example, you could be surprised by the amount of time you spend maintaining a lawn.

 

On the other hand, you might relish the chance to tinker in your very own garden, make HGTV-inspired improvements, or play with your dog in a big backyard. Or, if you’re more social, you might enjoy hosting family gatherings or attending block parties with other committed homeowners.

 

The great thing about owning a home is that you can generally do what you want with it – even if that means painting your walls fiesta red one month and eggplant purple the next.

 

The choice – like the home – is all yours. 

 

 

HAVE MORE QUESTIONS? WE’VE GOT ANSWERS

 

The decision to buy or rent a home is among the most consequential you will make in your lifetime. We can make the process easier by helping you compare your options using real-time local market data. So don't hesitate to reach out for a personalized consultation, regardless of where you are in your deliberations. We'd be happy to answer your questions and identify actionable steps you can take now to reach your long-term goals.

 

The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

 

 

Sources:

1.     CNN - 
 https://www.cnn.com/2022/08/11/homes/home-prices-second-quarter/index.html

2.     NPR - https://www.npr.org/2022/07/14/1109345201/theres-a-massive-housing-shortage-across-the-u-s-heres-how-bad-it-is-where-you-l

3.     Bankrate - 
 https://www.bankrate.com/mortgages/5-year-real-estate-rule/

4.     Federal Reserve Bank of St. Louis -
 https://fred.stlouisfed.org/series/MSPUS

5.     National Association of REALTORS - https://www.nar.realtor/blogs/economists-outlook/price-to-rent-ratios-by-state-from-2014-2019

6.     National Association of REALTORS -
 https://www.nar.realtor/blogs/economists-outlook/single-family-homeowners-typically-accumulated-225K-in-housing-wealth-over-10-years

7.     Statista - 
 https://www.statista.com/statistics/200223/median-apartment-rent-in-the-us-since-1980/

First Time Home Buyer Grant Programs

By Vickie Landis Rentsel • March 26, 2025
Unlock Your Dream Home: Pennsylvania First-Time Home Buyer Grants You Need to Know 

Home-Related Tax Deductions

March 11, 2025
Tax season. Just the words can send shivers down your spine. But if you’re a homeowner, there’s a silver lining: potential savings! You’ve probably heard that you can deduct the interest you pay on your mortgage — but did you know there are many other ways homeowners can reduce their tax burden? Before you start your return, read this post for common home-related tax deductions, eligibility requirements, and tips on how to maximize your savings. Home-Related Tax Savings: The Basics Before we get into the details, it’s important to define some important terms to set the stage. Tax Deductions vs. Tax Credits Most tax savings opportunities for homeowners come in the form of tax deductions. Deductions work by reducing your taxable income — essentially, the government allows you to subtract certain expenses from your total income before calculating how much you owe in taxes. This means a lower taxable income and, ultimately, a lower tax bill. For example, if you earn $50,000 and claim tax deductions worth $5,000, you will only pay taxes on $45,000. Tax credits, on the other hand, directly reduce your tax bill, rather than your taxable income. That means that if you owe $10,000 in taxes and claim a tax credit worth $2,000, your tax bill will be reduced to $8,000. Pro Tip: Meticulous record-keeping is crucial. Keep detailed records of all potentially eligible expenses. This will make tax time much smoother and ensure you don’t miss out on any deductions. Itemized Deductions vs. Standard Deduction To understand what deductions apply to your situation, it’s important to know the difference between itemized deductions and the standard deduction . The standard deduction is a fixed dollar amount that you can subtract from your adjusted gross income (AGI) regardless of your actual expenses. Itemized deductions, on the other hand, are specific expenses that you can deduct, such as mortgage interest, property taxes, and charitable contributions. You’ll need to choose whether to itemize or take the standard deduction. Generally, you should itemize if your total itemized deductions exceed the standard deduction. Most home-related deductions are only applicable if you choose to itemize. 2025 Standard Deduction Amounts Single and Married Filing Separately: $15,000 Head of Household: $22,500 Married Filing Jointly: $30,000 1 Source: IRS Key Home-Related Tax Deductions and Credits If you do choose to itemize your taxes, common tax deductions and credits available to homeowners include: Mortgage Interest Deduction No one likes to pay mortgage interest, but the good news is that you can deduct interest used to buy or build your primary residence or a second home. However, there are certain limitations that you need to be aware of. 2 Mortgage size: If you file your taxes single or married filing jointly, you can deduct interest paid on the first $750,000 of mortgage debt 3 for your primary residence or second home. If you are married but choose to file separately, that limit drops to the first $375,000 (for each partner). Requirements: The mortgage interest deduction only applies if your home is collateral for the loan (which is standard). To qualify as a primary home, your property must have sleeping, cooking, and toilet facilities. If you are deducting mortgage interest on a second home, you don’t need to use the home during the year; however, if you rent it out, you must spend at least 14 days or more than 10% of the days you rented it out (whichever is longer). So, how do you calculate how much mortgage interest you’ve paid? The amount of interest you pay each year will vary, even if your interest rate is fixed — that’s because mortgage amortization 3 means that you pay more interest earlier in the mortgage’s term, and more principal closer to the end. Each year, your lender will send you (and the IRS) a copy of Form 1098 , which shows how much you paid in interest. 4 For example, let’s say you are a married homeowner filing jointly with a mortgage for $400,000. If your Form 1098 shows that you paid $25,000 in mortgage interest in 2025, you could deduct the full $25,000 from your 2025 household income. Real Estate Taxes (Property Taxes) You can deduct state and local real estate taxes (property taxes) you pay on your primary residence or second home. However, it’s crucial to understand what qualifies. Only property taxes imposed for “general public welfare” are deductible 5 —if your town imposes a special assessment for a project that directly improves your property value, like a sewer line, that is not deductible. Furthermore, fees for local services, such as trash collection or sewer maintenance, are not deductible, even though your town may list them on the same bill as your property taxes. There’s also a limit: the 2017 Tax Cuts and Jobs Act imposed a $10,000 cap on the total amount of state and local taxes (SALT) 6 you can deduct. This includes state and local income tax (or sales tax) as well as property taxes. Finally, be aware that the amount you deduct must match the amount actually paid to the tax authority.7 This might differ from what you put into escrow if you pay property taxes through your mortgage lender. Typically, the amount your lender paid to your tax authority is listed on Form 1098. Home Equity Loan Interest You can deduct the interest paid on home equity loans or home equity lines of credit, but with a significant caveat. Since 2017, that interest is only deductible if the loan proceeds are used to buy, build, or substantially improve 3 your primary residence or second home, and the loan is secured by the home. If you use the home equity loan for other purposes, such as a vacation, debt consolidation, or purchasing a car, the interest is generally not deductible. If you use part of the loan or line of credit for eligible purchases, and part for non-eligible purchases, only interest incurred on the portion used for eligible spending is deductible. Loan interest is also not deductible if the funds are used for home improvement projects or repairs that do not “substantially improve” your home. Smaller projects, like repainting or new cabinets, likely do not qualify. However, projects like building an addition, a full kitchen remodel, or installing a new roof should qualify as substantial improvements. It’s also important to note that home equity loan and HELOC interest rate deductions are subject to the same upper limits 3 as mortgages (and are added together with your mortgage for calculation purposes). For example, if you have a $500,000 mortgage and a $300,000 home equity line of credit—which together exceed the $750,000 limit for a married couple—you would only be able to deduct interest paid on the first $750,000 of those combined loans. Home Improvement Expenses You can’t usually deduct home improvement expenses directly.9 However, the money you spend on capital improvements (improvements that increase your home’s value) can help reduce your tax bill later. These expenses are added to your home’s “cost basis,” 10 which reduces your capital gains tax when you eventually sell the house. Think of it this way: by keeping records of your home improvements, you’re essentially increasing the “price” you’re considered to have paid for your home, thus lowering your profit when you sell. It’s important to note that not all projects qualify as capital improvement. Basic repairs and updates likely won’t qualify, while major additions and landscaping likely will (the considerations are the same as those used to determine whether home equity loan interest is deductible). Beyond capital improvement, there are a few specific categories of home improvement that are deductible, including work on home offices (which is subject to specific limitations) and certain modifications for medical/accessibility reasons. 11

4 Home Remodeling Projects with the Highest ROI

February 7, 2025
Ask any homeowner about what they would like to change about their home, and most will say, “How much time do you have? Home improvements (cue Tim Allen) or home remodeling projects can stem from a variety of motivations, like preparing your home to put on the market, adding space for a growing family, addressing outdated features or aesthetics, or fixing structural/functional issues with the home. However, when it comes to home remodeling projects, too many people assume their project will proportionally increase the value of their home. Few actually consider the complete scope of return on investment (ROI), taking into account not only potential impact on resale value but also the total costs of time, labor, and materials. Some renovations may provide more “quality of life” ROI by improving comfort and aesthetics without significantly impacting resale value, while others can deliver notable financial returns. Whether you’re looking to upgrade your living space, increase the equity of your home, or trying to make some quick changes to improve your resale price, here are four remodeling projects with the highest ROI and some tips on how to get them done.
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