Rent or Buy?

Since everyone has been asking lately why we’re not going to buy a house when we move to Nashville, I thought I’d post a little item I ran across last week. In addition to the fact that I don’t believe in buying a house until you’re financial stable and out of debt, I also believe all of the economists who say that if the only reason you’re buying a house is for the investment, then you’re doing it all wrong – almost every other long term investment gives you a better return. I’m not scared of renting and I don’t subscribe to the philosophy that it means you’re “throwing your money away.” It costs money to live somewhere, and there are financial outputs in owning (albeit less) that you don’t recoup either – school taxes, regular upkeep and maintenance, etc.

Don’t get me wrong, I’m not a hater, I just don’t believe in doing something before it’s smart in a desperate attempt to “gain equity.” Soooo, until we can get closer to fitting the requirements below, we’re hanging in Rent Town for a few more years.

Stay put as a renter if...

You've got a three-year game plan.
It includes grad school or moving for work or family reasons. You need to hold on to a home for at least three years to recoup closing costs and fees.

Your super’s name is on your speed dial.
Whatever upkeep or repairs you do on your apartment now, multiply that by 100 when the home is your own.

You want a showplace, but it’s not in your budget.
Look for a luxury rental instead or keep putting money into your home acquisition fund.

The numbers don’t add up.
If your total monthly housing costs -- principal interest, taxes, insurance, and maintenance (and debt) -- exceed 42 percent of your annual gross income, stay put.

Consider Buying If...

You can afford it.
If the mortgage payment on your target home, insurance, taxes, car payments, and student loans are less than 36 percent of your gross monthly income, it’s a good signal to mortgage lenders that you’re not drowning in debt. Go to www.yourmortgagecalculator.com to estimate what your monthly payments are likely to be.

Your credit is good.
Run a check by going to www.annualcreditreport.com.

You have enough for a down payment.
The gold standard is 20 percent, but 5 or 10 percent will do. If you’re desperate to buy, check out 0 percent-down loans. But watch out: If home values drop, you could end up owing more than what the house is actually worth.

You have an emergency fund.
If you’ll have to empty your bank accounts to buy a house, wait until you can build up a cushion of three to six months’ worth of living expenses.

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Also, we made these crab cakes last night for dinner. Crab cakes are one of those things that we both like, but it never occurred to me to make them at home. They weren't bad for a first go-round. Next time we'll have to cut the crab meat smaller, make the patties smaller, and maybe look up how to make a true remoulade sauce, but they were still pretty tasty. I threw together a sauce of sour cream, fresh chives, lemon juice, mayo, mustard, Old Bay, horseradish and garlic. It was actually pretty good, but I like the remoulade better.