Renting vs Buying a home -- Showing the difference in payments -- Part 2 of 3

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Key Reminder - You don't need 700 credit scores and 20% down to buy




taking baby steps when buying a home 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.




Number Crunching

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.

rent vs buying a home scenario






















Here are the reults....

rent vs buying a home results





















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.



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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc


Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Lori Mode 10/09/2010 03:49 AM
  2. Charles Stallions 07/05/2017 10:00 AM
Lending / Financial
New Jersey Camden County Cherry Hill
1st Time Buyers
All About Mortgages/Mortgage Networking
POSITIVE ATTITUDE for the Weary Soul
first time homebuyers
renting vs buying
first time home buyers new jersey
fha loans
less than perfect credit
florida mortgages

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Marilyn Boudreaux
Marilyn Boudreaux, Century 21 Bono Realty - Lake Charles, LA
Lake Charles LA Century 21 Realtor

Jeff, best piece of advice in this article is don't talk to people outside of your loan officer!!!  Let the LO do their job, everyone has different goals in mind--Clients don't understand that other factors are involved and what rate their buddy Joe Bob got may not apply in their situation!  Everyone is unique and you are right on target (as usual) about how rates fluctuate.  This is good information to educate consumers, well done

Sep 25, 2010 02:06 PM #1
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Jeff, good example for rent vs. buy. I liked 'find a neighborhood you just 'LIKE'!

Sep 25, 2010 06:35 PM #2
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Nicely done Jeff.   I would (and do) include a rise in rental prices as most landlords will raise prices fairly regularly.

Sep 26, 2010 01:43 AM #3
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

Jeff, is homeowners insurance that much in NJ?  If so, it is no wonder that so many of you Yankees are moving down here!  Our propert taxes are about half of yours also. 

Sep 26, 2010 04:01 AM #4
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


MARILYN.... . over the years I have had some famliy members get involved and it was like a zoo. It's okay to get some advice, but to hang on their every words when I am the true expert in this field?  Kind of gets to you at times.  And thanks for the kind words and compliment.

PRAFUL.... .  I like to include some things in my posts that aren't always talked about or thought about.  And thanks for the compliment.

GABE...... .   I just used a 5% increase.. I am sure in some areas, it would be more.  And thanks for the compliment.

DAMON.... .  thanks for bringing this up. I just updated the scenario thanks to you.  I had to lump both the homeowners and the FHA mortgage insurance into one line, since this program didn't pick up the mortgage insurance.  But yes, our property taxes are high..  thanks


Sep 26, 2010 05:53 AM #5
San Antonio Texas New Homes for Sale - San Antonio, TX
Berkshire Hathaway HomeServices Hill Country



Jeff...Some good information to help educate people that need information to make an informed decision

Sep 27, 2010 01:47 AM #6
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Jeff -- This is very helpful to first-time buyers, and even perhaps owners thinking of selling and renting for various reasons.  Figuring out financials in details, with so many line-items and variables can be a challenge.

Sep 28, 2010 12:49 PM #7
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

One thing I wonder about your statement that a stock portfolio would perform better - If someone has $20,000, they buy stocks that return 6-8% on that $20,000.  But if they put it down on a $150,000 house, their 3% return is on the $150,000, not just the $20,000. I don't know how to do the math, but it seems the return on the house would be better ... ?

Sep 29, 2010 03:53 AM #8
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