Even though many define the American Dream as becoming a homeowner, more consumers are hesitating when it comes to taking out a mortgage in order to make that dream a reality. Consequently, some are choosing to rent instead of own.
The National Foundation for Credit Counseling recently conducted a poll that shows almost one in five survey respondents feel taking on a mortgage is just too risky. The NFCC mentions how the poll results align with the U.S. Census Bureau’s recent findings, which underscore the reduction in home ownership.
The home ownership rate for the first quarter of 2014 is 64.8%, which is the lowest home ownership rate in almost 19 years, reports the NFCC. The organization says not taking on a mortgage might be the best decision for those who may not be financially prepared for the costs that come with being a home owner.
Those thinking about purchasing a home must remember that they will have to deal with not only the monthly mortgage payments but also home improvements, taxes and insurance, and general maintenance.
“Renting until they are in a position to buy can help a person avoid a costly mistake, including the negative ramifications of foreclosure,” says the NFCC in a written statement.
The NFCC lists the following benefits of renting:
- Renting allows time to prepare for home ownership. You’ll be able to save more for a down payment, which can decrease the amount of monthly mortgage payments.
- You’ll have time to work on improving your credit. Building a stellar credit report and score can result in a lower interest rate on the loan.
- Renting allows for mobility. A 12-month lease is a fraction of time compared to a 30-year mortgage. If it becomes necessary to move for any reason, you won’t be shackled to your home until you’re able to sell.
- Less money is required up front. Security deposits are much less than broker’s fees and closing costs.