Getting a house is a significant achievement of an average working-class individual. Nothing is as sweet as being able to afford a property you have wanted for so long. One can get a house in several ways, but the usual route is buying one. There are three options: renting, buying, and financing. The latter two will essentially make you own the asset.
But should you buy a house or should you finance it? This article discusses the factors that can help you choose your means of getting a home and comparing buying a house to financing a house.
Buying vs. Financing
Buying means purchasing any product or service by paying for it on the spot. On the other hand, financing something means having to borrow money to purchase a product. You then have to pay your lender back according to the terms you have agreed upon.
It’s often a straightforward process to pay, besides all the other paperwork, but when you opt for financing options, the process can take longer, as you’d still have to pay the debt after you got the house. However, you can take many financing options, depending on the lender.
Whether you are to buy the house with your own money or get a loan to buy it, you have to consider your current situation.
Factors to Consider in Purchasing Your Home
Your Dream Home and its Expenses
Have you set eyes on a home yet? How much does it cost? The home you want easily determines how you may want to buy it. Moreover, it may even be a factor if you have to buy that specific home.
If you want to buy a house, you need to have enough money. If you are not constrained to a specific budget, go for it. However, buying a house can be difficult if you are short on funds. The obvious choice of action would be to save up money to be able to buy it.
But there’s a chance that someone else could get the house, or it will take a lot of time before you can save up enough money.
Financing your dream house makes for a quick way of having the house. You can borrow money to have enough to buy the house and then slowly pay it back. This method is a great option for people who don’t have enough budget, and many services are available on the market. For example, you can get a bank loan or mortgage or even through the Internet.
However, financing a house shouldn’t be a reason to neglect some of your financial responsibilities. You still have bills to pay and bellies to fill. Hence, if money is tight after financing a home and you need money for your daily expenses, weekly grocery runs, or utility bills, several online lenders and loans with good APR are ready to help you.
However, regardless of how you will be buying it, it’s crucial to consider the worth of the property. Houses are generally expensive, but you must select the one you can afford.
Your Means of Income and Budget
Your income is huge in getting your house or any other asset you need. It determines how much you can spend on the house you want, after all your expenses, like bills and more. Your earnings are crucial regardless of how you want to purchase a house.
For instance, if you want to purchase a house in total and can’t necessarily afford it now, the simplest solution is to save money; set aside part of your salary as savings for buying the house. The better your income is, the easier you can save to buy.
A better income can also help if you want to finance a house. You can pay off your debt with interest without worrying about money. Moreover, if you can pay the debt punctually, you can get good credit.
On the other hand, if your paycheck does not have much to support funding for a house purchase, it might be more challenging to get one. You may want to consider getting a better source of income.
If you plan to buy a house, will you live alone or with someone? And will this someone be able to help you with the purchase?
Living with another person with a source of income can significantly help, especially if you both share expenses. It can be a housemate or family with jobs like your parents or spouse. You can assess how much you can spend and contribute to determining how you can buy the house you want.
Your Credit Qualifications
If you’re considering financing a house, check your credit first. It can help qualify someone to avail of a great financing option. A simple way to check is through your credit score. The higher the credit score, the better deals you can get. An ideal score would be 670 and up. There are still great financing offers for people with bad credit, but it would help to improve your score.
The Renting Option
Do not sleep on renting a home. While having your own house provides you with a sense of achievement, sometimes, you may still be unable to afford one. So should you be in a position where you can’t afford a house but need a better place to settle temporarily, you can rent a place until you can buy your own.
There’s no objective answer as to if you should buy or finance a house; this choice is up to your preferences. However, ensure that you have enough funds to get a house and make sure the house you choose is something you can consistently afford.