A Comparative Analysis of Renting vs. Owning a Home

A Comparative Analysis of Renting vs. Owning a Home
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A Comparative Analysis of Renting vs. Owning a Home
Stella Guan, a 30-year-old graphic designer, spent months searching for a home to buy, but her frustrations exploded as she always got outbid in a hot real estate market in the suburbs of Los Angeles. She finally settled for an almost $600,000 Santa Clarita house many months later after her offer was accepted. After a short stint in her new home, she confessed that she did not like the house and hoped she had read all the warning signs and avoided being lured by the pandemic housing fever during Covid (Taylor, 2021). In today’s American society and many other countries around the world, the need for shelter has been a top priority for everyone regardless of the economic status of an individual. However, like Guan, many people snap up homes without performing due diligence to realize too late that they made wrong decisions. Renting vs. owning decisions is a frequent challenge that housing consumers face each day. While renting or buying a home is similar in the application processes, signing contracts, and making monthly payments, they have subtle differences based on upfront costs, maintenance, credit reports, and permissions to property modifications.
The processes of renting and owning homes share several similarities in terms of application requirements, signing contracts, and making monthly payments (Thompson, 2021). First, the financial history of renters and buyers is required by landlords to verify their incomes with pay stubs and W-2s. Similarly, for buyers, mortgage applications also demand buyers to submit tax returns and pay stubs before they are approved to purchase a home. Besides, landlords and financiers check credit reports to determine if one can afford to service the loan for the property and the ability to make timely bill payments. Second, the signing of contracts is mandatory for both buyers and renters. For instance, every lease agreement will have rules for residing in the property, termination notices, and the way to use the property. Buyers will need to sign deeds of trust that contain agreements on escrow payments, homeowners’ insurance, paying back the loans on time, and actions to be taken on loan defaults. Third, upon settlement, both buyers and renters will need to make monthly payments calculated based on the amount owed divided by the lease or loan period (Thompson, 2021). Tenants pay monthly rents to their landlords, and homeowners pay monthly mortgage payments to loan providers. Similarly, if the monthly payments are not made on time in both cases, actions such as foreclosure or eviction will ensue (Lux et al., 2020). Therefore, before deciding whether to buy or rent a home, it is important to consider the similarities of these decisions.
Although renters and buyers face sim...