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For many people, purchasing a home is the very definition of living their best life and achieving the American dream. But it’s not the right choice for everyone, and it might not be the right move to make at a given moment.

Owning a home may be the biggest financial commitment you’ll ever make, so it makes sense to carefully consider the upsides and downsides of buying vs. renting. Sometimes, the flexibility and affordability possible with renting can be a good fit.

Read on for advice that will help you answer, “Should I rent or buy a house?”

•   Learn the pros and cons of buying vs. renting a home

•   Take a quiz to help you decide if you should buy or rent a home

•   Find out the steps to take when you’re ready to start hitting the open houses

Rent or Buy a Home: Pros and Cons

Deciding whether to rent vs. buy is a very individual decision. There’s no rule about which is better; much will depend on your personal goals and your financial situation.

Let’s, take a closer look at whether it is better to buy or rent a house.

Advantages of Renting

Here, the upside of being a renter:

•   Low-maintenance lifestyle. Your landlord is typically responsible for repairs and maintenance, so your time and money can be spent elsewhere.

•   Potentially lower monthly expenses. Your landlord may also pay some of your monthly utilities, and you aren’t responsible for paying property taxes.

•   Flexibility. When your lease is up, you can renegotiate or move…across the street or across the country. If you aren’t ready to lock into a location for at least a few years, renting can be a smart step.

•   Low investment. You don’t need to make a big investment (like the down payment and closing costs associated with home buying) when you move into a rental. You might have to put down a security deposit, but that will typically be much less costly.

Disadvantages of Renting

Now, consider the downside of being a renter vs. a homeowner.

•   Rules to follow. Your landlord may have restrictions that you don’t like, such as no pets or no remodeling.

•   Not building wealth. The rent you pay each month doesn’t give you any equity in a property. It just goes to the owner, unless you set up a rent-to-own agreement.

•   Lack of control over your monthly charges. Your rent could spike due to inflation, the housing market heating up in your area, and other factors.

•   Uncertainty. If the owners decide to sell the building you live in, you may need to move unexpectedly and quickly, which can also get expensive.

Advantages of Buying

If you decide to buy vs. rent, here are some of the benefits you may enjoy.

•   Building wealth. As you make payments on your home loan, you are usually building home equity.

•   Tax advantages. Homeowners may be able to deduct both mortgage interest and their property tax payments (plus possibly other related expenses) from their federal income taxes if they choose to itemize their deductions.

•   Freedom. You have far fewer restrictions involving remodeling, pet ownership, and so forth. Want to paint a bathroom purple, rip out a wall, or adopt five rescue dogs? Go for it.

•   Stability. You can put down roots in a community and school district. When you decide to move, it’s your decision.

•   Affordability. Sometimes a mortgage payment can be cheaper than rent, especially if you get a good mortgage rate.

Looking at the price-to-rent ratio of a city helps gauge whether it makes more sense to buy or pay a landlord. The housing market dynamics of your location may determine this aspect of whether to buy or rent a house.

Disadvantages of Buying

Now that you know the potential upsides of owning your own home, take a look at the potential drawbacks.

•   High costs. The price of homeownership may be painful in a hot market. Accumulating the cash to make a down payment can be challenging and take years of saving. Plus, the closing costs when securing a home can be considerable.

•   Credit score. You typically need to qualify for a mortgage, and your credit score will be a factor. Those with excellent credit scores will get better rates; those with lesser scores may want to wait to build their rating before buying.

•   Maintenance. You’re generally responsible for all repairs, maintenance, and utilities, plus homeowners insurance, property taxes, and any homeowner association (HOA) dues. These can not only impact your finances but also your lifestyle. Taking care of a home and property can require an investment of time and energy.

•   Locked in place. You probably can’t pick up and move on a whim. If you decide to move, until your home is sold, you’re still responsible for mortgage payments and the expenses attached to your new place.

Take the Rent or Buy Quiz

Are You Really Ready to Buy?

When you’re supposed to be deciding between renting vs. buying a house, the answer may already be clear to you. If you’ve decided to buy, it might make sense to take the following steps.

•   Make sure you’re ready for a long-term commitment. If you’ve saved enough for a down payment and know how much house you can afford, those are good signs. Otherwise, create a home-buying budget and saving plan to get started.

•   Consider if your line of work allows for job continuity with steady income. Have you had this type of income for the past two years or more? That kind of stability can be important to lenders.

•   If your debt-to-income ratio (DTI) appears too high for a loan program you would like to apply for, you may need to consider paying down some debt. To calculate your DTI ratio, divide your monthly debt payments by your monthly gross (pretax) income. The federal Consumer Financial Protection Bureau advises renters to consider keeping a DTI ratio of 15% to 20% or less (rent is not included in this ratio). However, mortgage lenders usually like to see a DTI ratio of no more than 36%, though that is not necessarily the maximum.

•   Save money for a down payment, closing costs, and other fees, plus some funds for moving expenses and any remodeling/repairs.

•   Check if your credit score is good enough to buy a house, and, if it falls short, work on building it.

•   Do a gut check to see if you’re really ready to be your own landlord, meaning being responsible for your own home maintenance, inside and out.

•   Get prequalified or preapproved for a mortgage by providing a few financial details to one or more lenders. They will usually do a soft credit check and estimate how much you may be able to borrow and the terms. A prequalification or even a preapproval can also help give you a leg up when you start home shopping.

The Takeaway

Should you buy or rent a home? That will be a personal decision, reflecting your finances, the housing market’s dynamics, your willingness to take on the responsibilities of homeownership, and your inclination to put down roots in a certain location. Both owning and renting have pros and cons, and making the right decision will likely require careful consideration and thorough planning.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is it better to rent or buy a home?

There isn’t a simple yes/no answer to whether it is better to rent or buy a home. Each has its advantages and disadvantages and may or may not suit your needs at a given moment. For instance, owning a home can allow you to build equity and personal wealth, but the maintenance responsibilities and expenses may offset that for you. Renting may be cheaper, but you may not be able to personalize your space the way you’d like or perhaps own pets. Examine the tradeoffs to figure out what’s best for you.

Is renting cheaper than owning a home?

Renting can be cheaper than owning a home, though that can depend upon housing market conditions in a given area and the particulars of the home in question. In general, people who rent don’t have to pay property taxes and they may not be responsible for the cost of improvements and repairs, which can make renting more affordable.

Is homeownership a good investment?

Buying a home can be a good investment. It allows you to build equity and may offer tax deduction opportunities. However, if property taxes rise steeply or major home repairs loom (like a new roof), homeownership could prove financially challenging.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q225-180

Legislation providing for a tax credit for first-time homebuyers was introduced in Congress in 2021, and again in 2024. Unfortunately, as of June 2025, it is still making its way through Congress — or trying to.

Unfortunately, since this piece of legislation hasn’t passed in any of its forms, there is currently no active federal tax credit for first-time homebuyers.

Here’s everything you need to know about the history of the First-Time Homebuyer Tax Credit Act, in hopes it — or another bill like it — may have a future.

What Is the First-Time Homebuyer Tax Credit Act?

The first-time homebuyer tax credit refers back to a tax credit given in tax years 2008, 2009, and 2010. Then, it was worth up to $8,000. New first-time homebuyer tax credits were introduced in 2021, and again in 2024.

The proposed First-Time Homebuyer Act of 2021 was a revamp of the 2008 first-time homebuyer tax credit. It proposed increasing the allowable dollar amount of the credit from $8,000 to $15,000. (Another bill, the Downpayment Toward Equity Act of 2021, provided financial assistance specifically to first-generation homebuyers to help them purchase a home to occupy. However, it did not receive a vote in the House and expired. The Downpayment Toward Equity Act of 2023 was also not enacted.)

The legislation was again updated under President Joe Biden in 2024. It was reintroduced as the Biden First-Time Homebuyer Tax Credit Act. This latest proposal states that homebuyers could be eligible to receive a tax credit equal to 10% of their home’s purchase price, with a cap of $15,000.

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First-Time Homebuyer Act of 2008

For first-time homebuyers who purchased a home between April 9, 2008, and May 1, 2010, a one-time tax credit of 10% of the purchase price, up to $7,500 in 2008 and increased to $8,000 in the next two years, was available. It was part of the Housing and Economic Recovery Act of 2008. The credit was for home purchases of up to $800,000 and phased out for individual taxpayers with higher incomes.

For home purchases made between April 9 and Dec. 31, 2008, the credit had to be repaid over 15 years, making it more of an interest-free loan than a true credit. Homebuyers taking advantage of the tax credit in the following years had repayment of the credit waived. Homebuyers who left the property before a three-year period were required to repay a portion of the credit back to the IRS.

Proposed First-Time Homebuyer Act of 2021

The First-Time Homebuyer Act of 2021 would allow qualified buyers a refundable tax credit of $7,500 for individuals and $15,000 for married couples filing jointly.

This bill amends the 2008 law to allow for higher purchase prices, revises the formulas for income, and revises rules pertaining to recapture of the credit and to members of the armed forces. It was introduced in the House by Rep. Earl Blumenauer of Oregon in April 2021 but is not yet law as of June 2023.

Proposed Biden First-Time Homebuyer Act of 2024

The legislation, revised and again proposed as a bill in 2024, says that homebuyers could receive a tax credit equal to 10% of the purchase price of their home, capped at $15,000. Homebuyers could claim this refundable tax credit immediately, at the home purchase closing, and apply it to their down payment, closing costs, or other fees.
This proposal did not pass into law. It may be reintroduced in a future Congressional session, but it’s just as likely it won’t be resuscitated.

What Can Be Deducted After Buying a Home?

Amounts that would be eligible for the proposed tax credit would include the purchase price of the home. The amount of the credit would be 10% of the purchase price.

Given that the maximum would be $7,500 per individual and $15,000 per married couple filing jointly, if you and your spouse purchased a home with a mortgage loan of $500,000, the 10% credit would amount to $50,000. You would receive a tax credit of $15,000 if you filed jointly.

If you purchased a home for $102,000 with a spouse, 10% of that would be $10,200. You would be able to claim $10,200 for the credit if you filed jointly.

Here are some possible deductions now for homeowners who itemize, though most taxpayers take the standard deduction instead:

•   Mortgage interest on up to $750,000 of mortgage debt (or up to $375,000 if married and filing separately), including discount points paid to reduce the interest rate on the mortgage.

•   Up to $10,000 of property taxes when combined with state and local taxes.

•   Home office if you’re self-employed or a business owner but not an employee of a company.

If you sell your main home and have a capital gain, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 if you file a joint return with your spouse.

Recommended: Mortgage Interest Deduction Explained

Who Would Be Eligible for a First-Time Homebuyer Act?

First-time homebuyers purchasing a principal residence would be eligible for any tax credit passed. Not your first time buying a house? You may still be able to qualify.

A first-time homebuyer is defined as someone who has not owned an interest in a property for the past three years. So even if you had owned a home in the past, you could be eligible to receive this credit if it hadn’t been in the last three years.

Other qualifications might include:

•   A modified adjusted gross income that is under 160% of the area median income.

•   Purchase of a property that is not above a stipulated of the area median purchase price.

•   Living in the home as your principal residence for the tax year.

•   You must be over 18 years of age.

To note: If you claimed a first-time homebuyer credit under the 2008 law, you would be able to claim it again. But you could claim the new credit only once, for a first purchase. Also be aware that a copy of the settlement statement would need to be attached to your taxes.

How Does This Type of Tax Credit Work?

If a bill like this passed again, the new homeowner would file for the first-time homebuyer tax credit on their taxes. The credit would first be used to offset any taxes owed by the homebuyer. Then, as a refundable tax credit, the homebuyer would get money back on top of the amount of the credit after their tax bill had been paid.

For example, if you owed $4,000 in taxes after accounting for withholdings, and you qualified for a $15,000 tax credit, you’d apply that toward the amount you owe in taxes. You would get the rest back ($11,000) from the IRS.

Taxpayers would have to live in the home for the duration of the tax year in order to receive the credit. If the property is sold within four years, taxpayers might need to pay a portion of the tax credit back. The amount would be subject to a schedule, which is as follows:

•   Dispose of property before the end of Year 1: Repay 100% of the credit

•   Dispose of property before the end of Year 2: Repay 75% of the credit

•   Dispose of property before the end of Year 3: Repay 50% of the credit

•   Dispose of property before the end of Year 4: Repay 25% of the credit

Help for First-Time Homebuyers

Although new federal legislation hasn’t yet delivered support to first-time homebuyers, there are other first-time homebuyer programs that can help with costs.

A first-time homebuyers guide will walk you through the process of buying your first home and help answer questions.

Are you crunching numbers? Try this mortgage calculator tool. Keep in mind that some private lenders (like SoFi) allow a down payment for first-time buyers that may be even lower than FHA loans.

The Takeaway

A first-time homebuyer tax credit of up to $15,000 has been proposed for qualified buyers. At this point, it seems unlikely to pass Congress, but if it does some day, it would take some of the pressure of taking the plunge into homeownership.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

Photo credit: iStock/monkeybusinessimages

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q225-029

If you’re a homeowner, remodeling with recessed lighting may be a way to complete a small, accessible project that can potentially boost the value of your property. Not only can recessed lighting improve the ambience of your house, it may make it more energy-efficient, which is a growing concern for many homeowners and prospective homebuyers.

Here, you can learn more about this home renovation project and how recessed lighting could enhance the value of your home.

What Is a Recessed Light?

Recessed lighting is a lighting fixture that is set into a ceiling, virtually flush with the ceiling rather than hanging down from it. They’re often referred to as can lights or downlights.

Installation requirements for and the recessed lighting fixtures themselves are different for a remodel than new construction, depending on access to the area above the ceiling.

Generally speaking, it’s more common to have access to that space while a house is being constructed than for a house that’s already built. But for remodeling projects that do have that access to the ceiling, recessed lights can be installed.

There are two main parts to a recessed light — the housing and trim — with multiple options for each. The two parts can be purchased together in a kit, or they can be purchased separately.

Housing: The housing is the portion set into the ceiling and, depending on the type of fixture, can be visible or fairly hidden, and plain or decorative. It’s the part that is actually mounted to the ceiling and houses the bulb socket.

Trim: The trim is the most visible part of a recessed lighting fixture. Some types of trim are merely a ring covering up the edge of the housing, allowing more of the inner housing to be visible. Other types of the trim cover more of the housing, placing the emphasis on the level of illumination or where the light is directed.

Homeowners who want to change the look of existing recessed lighting can usually change the trim without needing to replace the housing. This is called retrofitting.


💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

What to Consider When Deciding To Add Recessed Lighting

There are a host of factors to consider when planning to add recessed lighting to an existing home. Sure, you want something that enhances the ambience of your home and helps maintain your home value.

As you move ahead and consider recessed lighting options, you’ll have a few factors to consider. These range from the function the lighting will perform to the style of light that will work best with the architecture of the home, as well as project cost and more.

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Function

To add general lighting to a room — a living room, for instance — ambient downlights will provide even lighting throughout the room. The number and placement of lights will depend on the size and shape of the room.

Is the goal to have better lighting when performing certain tasks, such as in a kitchen? Spotlights placed in areas above where those activities are done will serve this purpose well.

For instance, bright lighting placed over the kitchen sink can help ensure you can see what you’re doing when washing dirty dishes. Or recessed lighting over a counter section where most of the food preparation is done can help you see better as you slice and dice.

Some people might have artwork or architectural detail to accent. For those purposes, recessed lighting that can be pointed in the desired direction would be optimal.

Recommended: How to Keep Inflation from Blowing Your Home Reno Budget

Lighting

There are four main bulb categories: incandescent, halogen, compact fluorescent (CFL), light-emitting diode (LED), all in a variety of wattages. However, since July 2023, incandescent and halogen bulbs are typically unable to meet the standards of legislation that was passed to encourage the switch to more energy-efficient LED bulbs.

LED bulbs use semiconductors to convert electricity into light, a process that doesn’t emit heat as incandescents or CFLs do.

They’re much more energy-efficient than the other lighting option of CFL bulbs. What’s more, LEDs don’t contain mercury, nor do they contain wire filaments like incandescents and halogens, so it’s safe to dispose of them in regular household trash.


💡 Quick Tip: Home improvement loans typically offer lower interest rates than credit cards. Consider a loan to fund your next renovation.

Installation

Including recessed lighting in an existing home remodeling project typically requires fixtures that are supported by metal clips that are pushed through the housing onto the top of the drywall or plaster of the ceiling. This differs from new construction fixtures in which the fixture’s frame is screwed or nailed to the ceiling joists, which are accessible during the construction process.

Homeowners who have access to space above the ceiling where the fixture will be placed, such as attic space, may be able to use new construction fixtures. An advantage to this option is that fixtures made for new construction are generally less expensive and offer a wider range of trims than remodel fixtures.

Insulation is also a factor. If the lighting fixtures will be installed in an area where they will be in contact with insulation, they should be insulation compatible (IC) rated. If not, an alternative solution would be to use a fire-rated recessed light cover to go over the fixture’s housing in the attic.

Another rating to look for is the AirTight (AT) rating. This rating indicates that the fixture should keep heat from escaping. This might be less of a concern if there is living space above the room with recessed lighting, but when installing recessed lighting in a room with unfinished attic space above, the AT rating may be something to take into account.

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Cost

The cost to install recessed lighting in an existing home is dependent on several factors. How many lights will be installed? What type of recessed lighting will be installed? Will there be labor costs if the job is done by a professional? How much drywall repair and repainting will be needed after the installation is complete?

On average, recessed lighting costs about $300 to $500 per fixture when installation is being done by a professional; the cost of hiring a contractor can be considerable. A standard cost is $100 to $300 per fixture and almost $300 to install it, according to home improvement site Angi. A typical kitchen, for instance, might require six fixtures, for a total cost of $3,000. This cost can vary, of course, based on the number and type of fixtures, trim, and bulbs chosen.

Recessed lighting is a common feature in kitchen and bath remodels, both of which have a high return on investment. While the lighting itself might not be the ultimate selling point for someone thinking of purchasing a home, updating the lighting when undertaking a remodeling project just might add to that ROI.

Recommended: The Top Home Improvements to Increase Your Home’s Value

The Takeaway

Adding recessed lighting to your home is one way to increase the cozy factor while maintaining the home’s value for a relatively small investment. Understanding the scope of the job will make it easier to estimate how much it might cost and how best to pay for it based on your particular financial situation. In some cases, a personal loan can help you update your home and unlock its optimal value.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What are the guidelines for recessed lighting placement?

For accent lighting, recessed lighting fixtures should be 4 to 6 feet apart. For even lighting throughout the room, the experts at Home Depot say to divide the height of the ceiling by two. This will tell you how far apart your recessed lighting fixtures should be.

How many recessed lights do I need for a 12’ x 12’ room?

For a 12×12 foot room, you’ll usually need four to six recessed lights to achieve adequate illumination. This number can be tailored to best serve the room’s desired use and brightness level.

What are the disadvantages of recessed lighting?

Some people may not like the look of recessed lighting or how it illuminates their home. Also, improperly installed recessed lighting can result in high energy bills as well as ice dams and moisture damage in the roof.

Photo credit: iStock/Yulia Romashko

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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