Continue to rent or take the leap and buy. Renting an apartment or house has worked just fine so far, so why make a change? Besides, how could you ever afford to BUY A HOUSE? That's crazy talk! But people you love and trust keep telling you that interest rates are low and that you should buy a home. But what does that really mean?
Let's say that right now you are spending $1200 a month to rent a house in Edmond or NW OKC. The money you spend on rent is an expense. You are not receiving any tax deductions or building any equity (the value of the property over and above what is owed on the mortgage) when paying rent. Your landlord is, and they thank you.
Now let's compare that to buying a home in Edmond or NW OKC that is about $130,000. To do that, you will need a down payment of at least $4550 (3.5% of the purchase price). Don't panic. For first time home buyers, there are Bond Programs available to help with that. Keep in mind there are specific guidelines to follow for these programs and not all lenders work with bond money. You need to consult with your lender for more information. You will also have expenses (closing costs) involved in the purchase. Stay with me. They are typically about 3% of the purchase price. This expense can sometimes be negotiated in such a way that the seller pays these on your behalf. With new construction, some builders will even advertise this as an incentive, "We pay closing costs," for example.
The interest rate you qualify for depends on your credit score. If you have good credit, with an interest rate of 5%, your payment on the $130,000 home will be about $951.00. That will include the principle, interest, taxes, and insurance (PITI). So, if you are paying $1200 a month for rent, this mortgage could save you $249 per month. But that is not the only way you will save by buying instead of renting.
- Over the course of a year you will pay about $6200 in interest on your mortgage. This will become a deduction of about $1500 on your annual tax return.
- Most people live in a house for about 5 years. If the house you choose appreciates (an increase in value) at just 3% per year, after five years you could see an appreciation of $20,700.
Buying a home in Edmond or NW OKC may not be so crazy. Taking the leap may be the most sane thing to do!
I specialize in working with first time home buyers. Give me a call at the CENTURY 21 Goodyear Green office, 405-359-7400. Just ask for Kristyn Grewell and we will get started right away! By the way, most people can be in their new home in between 30-45 days. So check and see when that lease expires!
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