Sussex County Association of REALTORS^®
Bi-Monthly Real Estate Article
The Sussex Countian and Milford Beacon

Should you sign a new lease or is it time to become a homeowner? To make an informed decision on whether to rent or buy, you should consider a few factors, such as your lifestyle and financial situation. There is no right or wrong answer - just what works best for you.

Homeownership is not for everyone. People who simply do not want the responsibility of owning a home and all that it involves are better off renting. In a rental situation, the landlord or property owner generally arranges and pays for any work or repairs that are done to the property. On the flip side, you wave goodbye to your money each month when you rent. Tax advantages go to the landlord.

Owning a home is the largest purchase most people will ever make and is a major responsibility. In addition to a monthly mortgage, it also involves other costs such as insurance, taxes, repairs and general maintenance.

Purchasing a home is generally a sound investment. In fact, a 2003 report by Harvard University's Joint Center for Housing referred to homeownership as the cornerstone of household wealth, especially for low-income households. The report went on to say that with the growth in the U.S. homeownership rate, housing wealth is important to more American households than ever before. According to the 2001 Survey of Consumer Finances (SCF) data released in February 2003, home equity accounted for about 21 percent of household net wealth. On average, a homeowner holds 48 percent of his or her net household wealth in the form of home equity.

As you pay on your home loan, you build equity. And unlike many things you buy, your home can actually increase in value over time. Homeownership also provides tax advantages. The mortgage interest and real estate taxes are tax-deductible, which reduces your tax liability.

Ginney Mae has a good online tool to help you compute the cost differences between buying and renting. The buying-versus-renting calculator is available online at Ginnie Mae.

There is little doubt that for most people owning a home is better over the long term than renting. If you're thinking about making the transition from renter to homeowner, it's important to do your homework.

How much can you afford? Mortgage lenders typically use the housing expense and debt-to-income ratios to determine how much you can pay and what size mortgage payment you can handle. Generally lenders recommend that your monthly mortgage payment should be less than or equal to a quarter of your monthly gross income, depending on the type of mortgage you choose. Your total debt (credit cards, loans, alimony, child support, etc.) is also a factor. Lenders usually look for total debt that is smaller than 30 to 40 percent of your monthly gross income.

A REALTOR^® can help you determine if homeownership is right for you, how much you can afford and what costs to anticipate for a down payment, attorney fees and closing costs. Your REALTOR^® is also a great source of information on what types of mortgage packages or other financing options are available.

The Sussex County Association of REALTORS^® (www.scaor.com) is one of four professional REALTOR^® trade associations in Delaware for individuals involved in the real estate industry and allied industries and firms. With membership of over 1,300 REALTORS^® from more than 100 real estate offices in Sussex County and surrounding areas, SCAOR provides products, programs and services for its members. SCAOR is located at 23407 Park Avenue in Georgetown and can be reached at (302) 855-2300.