My Hattiesburg

3 Steps in Deciding to Buy or Rent

October 28, 2005 on 4:38 pm | In Buying a Home |

Step 1: How long do you plan on staying in a particular area?
If you have a job in your home town then you probably would do good by owning your home. However, if you are in town for a limited number of years then you probably shouldn’t buy a home. It is really self explanatory.

Step 2: Your Financial Situation
Several factors come into play here such as your income, credit card debt, current living expenses (car, groceries, medical bills, ect..) and savings. A general rule of thumb is that the monthly cost of maintaining your home (mortgage payment, insurance payment, and tax payment) should not exceed 28% of you gross monthly income. If the maintaining cost exceeds 28% of your monthly income then you would be better off renting until you can get your monthly income up some.

Step 3: Tax Benefits
The federal government allows homeowners certain income tax advantages. Homeowners may deduct from their income some or all of the mortgage interest paid, as well as real estate taxes and certain other expenses that were involved with purchasing the house. Also married taxpayers who file jointly can exclude up to $500,000 from capital gains tax for profits on the sale of a principal residence and taxpayers who file singly are entitled to a $250,000 exclusion. Renting a home does not provide any tax benifits that I am aware of. However, you should always consult a certified tax professional when dealing with such matters.