3 Signs You're Not Ready to Stop Renting

by Maurie Backman | Updated July 19, 2021 - First published on May 5, 2021

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A happy couple looks sitting on the floor between moving boxes and drinking coffee.

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Thinking of going from renter to homeowner? You may want to wait if these things apply to you.

Though mortgage rates have risen over the past couple of months, they're still pretty attractive. As such, you may be interested in buying a home once your current lease agreement comes to an end. But while there are certainly a lot of benefits to owning a home, you may want to keep renting if these factors apply to you.

1. You don't have much of an emergency fund

When you rent, the only thing you really need to worry about is coming up with your monthly rent payment. But when you own a home, there are numerous costs you'll need to grapple with outside of your mortgage payments, like repairs and other unplanned expenses. If you don't have a solid emergency fund, you could wind up in serious debt as a homeowner, so you're better off continuing to rent until you manage to build up some cash reserves.

2. You don't have a decent down payment saved up

You may not need a huge amount of money for a down payment on a home, depending on the type of loan you qualify for. For example, FHA loans let you put down as little as 3.5% on a home. But if you're looking for a conventional mortgage, you'll generally need to put down at least 5% of your home's purchase price, and many lenders insist on a higher figure. Plus, if you don't put down at least 20% with a conventional loan, you'll be hit with private mortgage insurance, which has an expensive monthly premium you'll pay on top of your regular mortgage payment.

While FHA loans let you get away with a lower down payment, they also charge mortgage insurance premiums that are similar to private mortgage insurance. In that case, you could end up on the hook for extra fees in the absence of a more robust down payment. So if you're lacking funds for a down payment, it could be worthwhile to rent a bit longer and work on saving more.

3. You have a packed schedule with little time for home maintenance

When you rent a home, it's your landlord's responsibility to maintain it. But when you own a home, that upkeep is on you. If you work long hours and don't have a lot of free time to devote to maintenance, you may be better off renting until your schedule eases up. Otherwise, you may be forced to bust your budget outsourcing that upkeep.

Owning a home can benefit you in many ways. Not only can a home grow in value over time, but owning one offers you more stability than renting. After all, your landlord could decide not to renew your lease, thereby forcing you to move. But if you're going to buy a home, it's important that you're up to the challenge -- logistically and financially. And if the above scenarios apply to you, renting a bit longer could really work to your benefit.

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