There are advantages to owning your own house or apartment in the United States. Your long-term goals, your employment situation, your budget, the amount of your savings and debt, the ability to get a loan—and especially the location where you want to live will be major factors in the decision whether to buy or rent a home. Let’s explore homeownership in the United States.


Mortgage Loans

Unless you are buying a home with cash, you will need to be approved for a loan called a mortgage from a bank. The bank will decide the maximum amount they are willing to loan you based on your income, credit score, savings, debt, and assets. In most cases, you will need to make a down payment (a percentage of the purchase price of the home). If approved, the bank will loan you the rest of the money to buy the home. You will pay the bank back each month with interest for the length of the loan (in the U.S., a 30-year mortgage is the most common type of home loan). It is important to remember that the smaller your down payment, the higher your monthly loan payment will be. And if your down payment is less than 20%, you will most likely be required to purchase private mortgage insurance (PMI) as security for the loan. If the loan is approved, you will also pay to the bank what are called closing costs. Closing costs can vary between 3% and 5% of the loan amount.


If you successfully purchase a home with a mortgage, your monthly payment will include the home’s property tax and homeowner’s insurance which will often increase each year. After you purchase the home, depending on the type of home (apartment or house) you will also be responsible for other expenses such as homeowner association fees, utilities, trash removal, water, and sewer charges. You will have to pay for repairs and the maintenance of all the systems that keep the home operating. Major repairs can cost many of thousands of dollars. All these additional expenses should be understood and considered before you decide to buy a home.


If you fall behind on your loan and miss payments, the bank may eventually take the home away from you, and your investment will be lost. This is called foreclosure and will also adversely affect your credit score and ability to get future loans. Therefore, it is essential that when buying a home, you have a financial plan and are confident that in the foreseeable future, you will have enough income to pay all your monthly expenses and pay for the maintenance of the property.


Should I Rent or Buy a Home?

There are advantages and disadvantages to consider when deciding to rent or buy a home. If you own a home and pay your loan and expenses each month, you will have a stable place to live. When you rent a home, you may be forced to move if the rent increases, if your lease is not renewed, or the owner decides to sell the property. Another advantage to owning a home in the U.S. is that most traditional home loans have a “fixed interest rate,” which means that your monthly loan payment amount will not change if you get this type of loan. Also, when you own a home and start paying off your loan, you begin to have more and more percentage of ownership in the home (called equity). If you decide to sell it, you will get a larger amount of the total sale price that you can use for your next housing situation.


When renting a home, you will not need as large a sum of money as you would when buying a home. You will not have to get approval for a loan from a bank, which can take weeks or even months. You will have more flexibility if you need to move to another location. You also won’t be paying property taxes or be responsible for the cost of repairs and maintenance.


Some important factors to consider when deciding to rent or buy a home are:

  • Home purchase prices compared with rental prices in the location you choose to live
  • The availability of homes for sale compared to homes to rent in the location you choose to live
  • Interest rates and type of mortgage
  • How much of a down payment, monthly loan payments and closing costs you can afford
  • Your eligibility for a low interest loan that may only require a small down payment
  • How long you plan to live in the home


For a general idea of the cost of renting vs. buying, try using a rent vs. buy calculator.


Government Housing Loan Assistance Programs

These are some U.S. government and state loan programs that help low-income buyers purchase homes:


  • Federal Housing Administration (FHA) loans help eligible buyers with limited savings or lower credit scores to get a loan from a bank with a small down payment and low interest rates. All FHA loans require private mortgage insurance (PMI). The amount of insurance will depend on the amount of the down payment.
  • United States Department of Agriculture (USDA) loans are from local lenders and are insured by the U.S. government. These loans offer low interest rates and zero-down-payment for homes in eligible towns and rural areas. One special type of USDA loan is specifically for low-income applicants who are without safe housing or who can’t access a traditional mortgage loan. USDA loans don’t require private mortgage insurance (PMI).
  • Each state has a Housing Financing Agency (FHA) which deliver special financing for low -income buyers to help make possible the purchase of affordable homes. Use this resource to find an FHA in your state.


Housing Counseling Services

If you need help making a decision about buying a house, a nationwide network of counseling agencies help consumers across the U.S. by providing the answers they need to make informed housing decisions. Use this resource to find a counseling agency in your state that is approved by the United States Department of Housing and Development (HUD).