Buying a Home Vs Renting a Home

The decision to buy or rent is a very important question being asked by many potential homebuyers trying to achieve the dream of home ownership in today's turbulent real estate market. There are a few things to consider when considering taking that leap into home ownership and get out of the renting situation. There are of course the obvious benefits of home ownership over renting in which home ownership includes a building of equity, tax benefits and the comfort of knowing the lease will not end, as long as you pay your mortgage.

Almost everyone would like to, at some point in their lives own a piece of real estate and that is more pronounced here in Hawaii where real estate is limited since we are on an island. Land is expensive and space is limited. There is no building out into the suburbs as other major cities might do. Our suburbs are 10 miles west to Kapolei, Ewa Beach and the Waianae coast. There may have been a time when a young adult could save up 20% for a down payment and purchase a small home a few years out of college but, in today's real estate market in Honolulu, 20% is about 2-3 years salary for young people starting their careers. The more common real estate solution for Hawaii's young people is to get a few friends together to rent a condo, townhouse or apartment. The thought of purchasing a home is a far off dream reserved for "when they start making good money". Unfortunately with Hawaii's high costs of living (outside of real estate) is high as well so, the cycle of renting perpetuates much longer than expected.

Home ownership in Hawaii really has become the dream and can be difficult to make into a reality unless some really difficult but, important decisions are made on the part of the soon to be home owner. The first thing is to make the decision to buy real estate and focus on developing a plan to do just that in a specific and realistic time frame.

The first thing to do is to do an analysis on your current financial picture including income from all sources and all outgoing expenses. A great way to track spending and expenses is to get receipts for everything for 3 months and keep them all in one place. Go through them all and put them into specific categories so you know where your money is going. This will give you a clear financial picture so that you can begin your plan to save, save, save for that perfect piece of Hawaii real estate.

The next thing to do is to talk to your lender about getting pre-qualified for a mortgage. Your loan officer or mortgage broker can give you an idea of what you can qualify for as far as loan amount. Although we have experienced an explosion in 100% financing options in recent years, it is recommended to have 10-20% down payment. This would help should you find the need to sell quickly. It is less likely that you will be upside down on your mortgage, avoiding a short sale or foreclosure.

Once you have your down payment plus for closing costs associated with loan closing costs and escrow closing costs, it is time to start looking for your dream home or at least your first step to your dream home which could be a dream condo.

Real Estate