Key Reminder - You don't need 700 credit scores and 20% down to buy
Figuring out the differences between renting vs buying a home can be stressful. I gave you some pros and cons of buying a home in Part 1. Things seem good, because you are learning how to break this down. That's great......
Tip : Keep your focus and don't be talking to too many people outside of the loan officer that you are speaking with. That's if you have picked one by now. And by this, I mean don't ask in depth questions to your parents, friends, neighbors, etc, etc. It could get confusing.
There is a reason for this. Programs change often and so does the way of financing. The biggest thing, mortgage rates can change daily! What your friend received last week might be totally different the following week.
- This may sound simplistic, but first and foremost you should find a neighborhood and a home that you just plain like.
Keep in mind that while home ownership provides security, it almost certainly won't give you the returns provided by equities. If history is any indicator, you can reasonably expect an 6% to 8% annual gain on your stock portfolio. Home prices, on the other hand, typically follow the rate of inflation over the long term which is usually 3% appreciation. Ignore what happened the last 3 years. In the scenario below, I only used a 1% appreciation increase. Hence why it is sometimes good not to put as much down when buying your home. Your loan officer should be asking you about your goals when talking to you. Don't work for your home, let it work for you. And a loan officer should always be asking you what mortgage payment that you would be comfortable with, your maximum payment.
The scenario below is on a FHA loan and is based on a $225,000 purchase. The rent payment used is $1,100.
Here are the reults....
As you can see, your mortgage payment would be about $651 more a month then what you are currently paying for rent. Keeping in mind, each market is different when it comes to monthly rents and home values. This is just an example. But the end result shows if you were to rent for 5 years, that if you bought and kept the house for 5 years, that you would come out ahead. Buying in this scenario is better.
Post Purchase Tip : After you buy your home, just be careful of property scams!!!
***Important info : There are many types of rent vs buy calculators. Not all of them are accurate because there are several factors involved.***
In regards to Part 3, I will give you examples of the different types of programs for those with money saved, no money saved, and those with less than perfect credit.