Last night I received a call from an excellent realtor I've worked with for years. She sounded down, uncharacteristicly. Seems her prospective young buyers, who just had a baby, had suddenly decided they would not purchase a house that seemed perfect in every way. The property is in Millville, NJ. Those unfamiliar with Jersey should know that Millville is getting state funding, called the RAD program, which allows for the town to pay up to $5,000 in closing costs, AND match dollar for dollar up to $5,000 in down payment.
I wrote a letter to the buyers this morning, and forwarded it to the realtor, who was so pleased with it that I decided to post it. The names have been changed for obvious reasons, but the content is word for word. I addressed it to the buyer's mother, who was willing to co-borrow to strengthen the case.
Hi, Jennifer,
Arleen told me last night that Bill and his fiance have decided not to purchase, so I thought I'd take a stab at trying to explain the opportunity they may be allowing to slip away.
Historically, rates and home prices have always been on opposite ends of the seesaw. When rates are down, home prices are up. When home prices are down, rates go up. This economic maxim was almost as certain as death and taxes. The old saying was, one way or another, you always paid the same for a home, either thru rate or price.
BUT, that is not true right now. Both home prices and rates are at historic lows! There simply will never be a better time to buy a home.
I realize there are pressures with a young family, and being a homeowner with a mortgage can be intimidating. But I would sincerely advise that to rent now in lieu of purchasing is a mistake that may haunt you for years.
If you go on the Millville sites, you'll see how progressive they are with redevelopment, how aggressive they've been with locking down funds for improvements in all facets of the town, commercial and residential. This property could very well be a homerun in terms of value 5-10 years down the road. And this is not even taking into account that the town of Millville will match dollar for dollar on down payment up to $5,000. Frankly, I don''t know how anyone could walk away from this. I have a friend who has purchased properties in Millville. He refurbs and rents them out. He figures he'll collect rent, let someone else pay his mortgage FOR him, while he waits for the values to increase and can sell at a profit down the road. That's the kind of confidence he has in Millville.
The last few days have been excellent for the bond market. At this point its almost a certainty that I will be able to get you a fixed rate at 5% or lower!
At 5%, your total payment, including HOI and RE taxes, will be $1,245 per month. This is based on a $160,500 S/P, with $10,000 down (your 5 G's and the town's match).
Right now, Uncle Sam is taking roughly 28 cents on every dollar you make because you have no mortgage to write off. So, in reality, a $1,245 mortgage payment is equivalent to a rental payment of $900. So, you've got to think, am I better off renting? What kind of rental is out there for $900, or even $1,200, for that matter? And, in the meantime, this little window, where both rate and price are amazingly low, will not stay open long. So, if you're thinking that you'll buy in a couple years, you're likely to pay a whole lot more, both in rate AND price. Even if its not Millville, you should seriously consider buying somewhere.
Sorry for the length of this. Of course, as a mortgage rep, I'm a 100% commission employee, so, if you don't close, I don't get paid. So I have my reasons for wanting to see you purchase, of course. But nothing in the above is in the least exaggerated.
Call me anytime, guys. I wish you all the best, and congratulations on the baby. Best of luck regardless of what you decide to do.
Regards,
Marty Hancock
PS....I was on such a roll writing the letter that I forgot to even mention the $8,000 tax credit! Which, of course, I mentioned in a follow-up e-mail.
The mother, who still wants them to go through with the purchase, told the realtor that it was a great letter and that the kids absorbed it and are reconsidering.
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