Is it better to rent or buy a home? How do I decide what’s best for me?

Ralph Estep Jr.:
00:00

Do you ever lay there, staring at the ceiling, wondering, should I be renting, or should I be buying a place? We're tackling that very question today. So buckle up, grab your coffee and get ready to unpack the age-old debate: Rent versus Buy and what's best for my specific situation.

Ralph Estep Jr.:
00:21

Hey everyone. Welcome back to the Ask Ralph Show. It's Finance Friday, which means we're diving deep into a question that's probably crossed your mind a time or two, or maybe it keeps you up at night. You know, I get it. The pressure to own a home? It's real. Everywhere you turn, someone's telling you it's the key to financial security, the American dream, the whole shebang.

Ralph Estep Jr.:
00:43

But is it really all it's cracked up to be? And more importantly, what does the good book have to say about it? Stick around because you're about to find out. Yesterday, we talked about the Secure 2.0 Act. If you missed it, don't worry. Just head over to askralphpodcast.com and you'll find all of our daily episodes. I'm sure there are some that will be really helpful for your financial journey.

Ralph Estep Jr.:
01:07

Let's hear what's got one of our listeners fired up about the topic of renting versus buying. Looks like we got a message from George in Iowa. George writes this: "Dear Ralph, I'm so confused. Everyone keeps telling me I need to buy a house, that renting is just throwing money away. But with interest rates being what they are and the cost of everything going through the roof, I just don't know if I can swing it. Plus, to be honest, I'm worried about being tied down to one place. Help! What should I do?"

Ralph Estep Jr.:
01:42

Well, George, let me start by saying you're not alone in this. That's a fantastic question and one that deserves a thoughtful answer. So many people are wrestling with this very dilemma. And today we're going to break it down step-by-step with a healthy dose of biblical wisdom to guide us.

Ralph Estep Jr.:
01:57

Now before we jump into the nitty gritty of renting versus buying, let's take a moment to center ourselves in the scriptures. Proverbs 24:3-4 says this. "By wisdom a house is built, and by understanding it is established; by knowledge the rooms are filled with precious and pleasant riches." You see, it's not just about bricks and mortar. It's about building our financial houses on a foundation of wisdom, on a foundation of understanding, and on a foundation and knowledge. And that's exactly what we aim to do here day after day.

Ralph Estep Jr.:
02:40

So let's dive into today's topic. Is it better to rent or buy a home? Now, I know what you're thinking, "Ralph, just give me the straight answer." But the truth is, there is no one size fits all solution. What works for your neighbor, your cousin, or that guy on the internet might not be the right fit for you. It all boils down to your individual circumstances, your financial goals and yes, even your personal values. So let's start with the financial side of things.

Ralph Estep Jr.:
03:10

When you buy a home, you're building equity, which is like putting money in the bank, right? right? Well, sort of. You're also going to be responsible for property taxes, insurance, maintenance, and let's not forget those pesky interest rates. Renting, on the other hand, gives you flexibility. You're not tied down to one spot. You don't have to shell out big bucks for those unexpected repairs.

Ralph Estep Jr.:
03:34

I feel like I'm going through that right now. It's been about 10 years since our house was renovated. It seems like everything is breaking. But you're also not building equity and your monthly payments are going straight into your landlord's pocket. And trust me, my wife and I have found ourselves in both situations over our marriage.

Ralph Estep Jr.:
03:51

And the truth is, each has had its positives and negatives. So you have to weigh some factors. So, how do you weigh these factors? That's where that good ol' biblical wisdom comes in. Proverbs 15:22 reminds us, "without counsel, plans fail. But with many advisors, they succeed."

Ralph Estep Jr.:
04:10

So don't be afraid to seek out advice from trusted financial experts. Seek out advice from mentors and even your pastor. They could help you assess your current financial situation, explore your options and make a decision that aligns with your values. Over and above reaching out for some expert counsel. And let me say, I'd be happy to have a conference call with you to discuss your personal situation. That's what I do. You can schedule that right at askralphpodcast.com/store.

Ralph Estep Jr.:
04:37

But here's a few practical steps you can take right now. First of all, create a budget. I know, I know what you're saying. I know, I know. Not the most exciting task, but trust me, it's crucial. Knowing where your money is going is the first step to make an informed financial decision. You really have to test your finances to really see how you're going to handle a mortgage payment and the other things that come along with being a homeowner. Be sure to check out my episode about those hidden expenses that nobody talks about from a week or so ago. That's right on our website. Again, that's at askralphpodcast.com.

Ralph Estep Jr.:
05:11

Second, calculate your debt-to-income ratio. This is a key factor lenders use to determine your mortgage eligibility. Aim for a debt to income of 43% or lower. As a general rule you'll need what's called a front ratio of no more than 28%. Now, that's the mortgage payment as a percentage of your income.

Ralph Estep Jr.:
05:30

So for example, if your projected mortgage payment is going to be $2,800 a month, you'll need income of at least $10,000 per month to meet that ratio. You then have to make sure that your mortgage plus all your other loans are no more than 43% if your income, that's what they call the back ratio.

Ralph Estep Jr.:
05:48

So following our example, your total bills would need to be no more than $4,300 per month with that $10,000 monthly income. So effectively, you could have the $2800 mortgage and your auto and other loans can't be any more than $1500. It does get complicated, but with a trusted advisor, they can guide you right through the process.

Ralph Estep Jr.:
06:07

Let's look at the third step. And that's get pre-approved for a mortgage. This will give you a clear picture of how much house you can afford and help you shop with confidence. The truth is, most realtors won't even bother showing you a home until you have that pre-approval in hand anyway. They don't want to waste their time or potential sellers time without your first clearing the preapproval hurdle.

Ralph Estep Jr.:
06:28

The fourth step. Factor in all the cost of home ownership Don't just focus on the mortgage payment. Consider property taxes, insurance, maintenance, and like I talked about those potential repairs. You've heard the home is a money pit. Yes. It's sometimes the case, so you have to be prepared.

Ralph Estep Jr.:
06:48

And last, but certainly not least. You got to pray for guidance. This is a big, huge decision. Seek God's wisdom and trust that he will lead you in the right path.

Ralph Estep Jr.:
06:59

Well now let's talk about the emotional side of things. For many of us, owning a home represents stability. It represents security and a place to put down roots. And there's nothing wrong with that. But it's important to remember that true security comes from the Lord, not from a physical structure. As Psalm 46 verses 1 and 2 reminds us, "God is our refuge and strength, an ever-present help in trouble.”

Ralph Estep Jr.:
07:25

“Therefore, we will not fear, though the earth may give way and the mountains fall into the heart of the sea." So in the end, whether you choose to rent or buy, remember that your home is ultimately a gift from God. A place to experience his love and share with others. So make it a Haven of peace, a Haven of joy and hospitality, regardless of whether you own it or you rent it.

Ralph Estep Jr.:
07:50

Now, I know some of you are probably thinking, "But Ralph, what about the current state of the economy? How does that factor into this equation?" And that is a great question. The truth is the economy is always in flux. Interest rates go up, interest rates go down. Housing prices fluctuate. It's enough to make your head spin.

Ralph Estep Jr.:
08:08

But here's the thing. Don't let fear or uncertainty paralyze you. Remember what Philippians 4:6-7 tells us. "Do not be anxious about anything, but in every situation, by prayer and petition, with Thanksgiving, present your request to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus."

Ralph Estep Jr.:
08:34

So instead of getting caught up in the hype or letting fear dictate your decisions, focus on what you can control. Build a solid financial foundation, seek wise counsel, and trust that God will guide your steps. And who knows? You just might find that perfect opportunity present itself when you least expect it.

Ralph Estep Jr.:
08:53

Well, that's all the time we have for today. Hope this episode has given you some practical tips and biblical wisdom to navigate the often-confusing world of renting versus buying. Remember, there's no right or wrong answer. Only the best choice for you and your unique situation.

Ralph Estep Jr.:
09:08

And hey, if you're looking for more guidance on your financial journey, be sure to visit our website. That's at askralphpodcast.com. When you join our email list, you'll receive a free copy of my book, says it right here, Mastering Your Finances, is packed with even more tips and strategies to help you achieve financial freedom, God's way. That's a $10 value, absolutely free. Just head over to askralphpodcast.com and sign up today.

Ralph Estep Jr.:
09:31

And listen, don't forget to tune in tomorrow for another episode of the Ask Ralph Show. We dive into the world of homeowner's insurance. Exploring different types of policies and which ones are essential for protecting your most valuable assets. If you pulled the trigger and bought that home, you don't want to miss it. So as I always say, until next time, stay financially savvy and God bless you.