Common Rent vs. Own Questions

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Common Rent vs. Own Questions

Most people believe owning a home is more important than renting one….

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Most people believe owning a home is more important than renting one. While there are definite financial benefits to owning a home, renting until you are able to purchase a home can have other benefits you might not have considered.

Here are some of the most frequently asked questions about whether you should rent or buy:

How does renting help first-time home buyers?

Spending time renting can help boost your credit history. When you pay your monthly rental payments, the three major credit reporting bureaus take notice and will include this information on your report if they receive it from your landlord.
Some landlords are unaware that this is something they are able to do, but asking them can’t hurt. Various third-party providers, like Rental Kharma, CreditMyRent, and Rent Reports now offer rental history credit reporting services for a fee.

What are the advantages to being a renter when you do decide to shop for your first home?

Buyers will compare the debt-to-income ratio of any inquiring purchaser (whether they are a renter or a current homeowner looking for a new home). When an existing homeowner plans to sell their home once they purchase the new one, the mortgages from both properties will be counted in their debt-to-income ratio. Renters don’t have this additional debt and so are more likely to qualify for a new mortgage – making them look like a better option.

What hinders renters when you decide to shop for your first home?

Renters might be at a disadvantage when compared to an existing homeowner who wants to rent out their current home and purchase the new home to live in. 75% of the market rent for their current home can be used towards their debt-to-income ratio – meaning, if all other aspects between the renter and the existing homeowner are equal, the existing homeowner is going to be in better shape to qualify for a new mortgage.