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How Some Renters Can Become Homeowners & Pay the Same for Housing

Real Estate Agent with DomainRealty.com LLC BK3275810


Home Sweet Home...Where are you?

Some renters do not realize that it may be possible to buy a home and not have to increase their housing budget. Therefore, this article is particularly important to renters who are serious about becoming home owners.

Here's how:

First, calculate your current total housing costs on a monthly basis as a renter. It will include the base rent and utility, maintenance, tenant responsible repairs and other applicable costs. Use your lease, checkbook statements and credit card summaries to make sure your total housing cost number is accurate.

Second, identify and add the various estimated monthly costs associated with home ownership except for principal and interest monthly payments. Here you will be adding monthly expenses as applicable for items like taxes, homeowner's insurance, private mortgage insurance, HOA/Condo fees, special assessments, utilities, maintenance, repairs and any other associated expenses. Much of this information is available from the listing and consulting your real estate agent, insurance agent, lender and internet sources.

Third, subtract your total partial homeowner expenses from your total expenses as a renter. The result will be the amount of money necessary to cover the monthly mortgage principal plus interest payment due.

Fourth, using a mortgage rate calculator you will be able to determine the price you can pay for a home and not exceed what you are now paying as a tenant.

Here's an example:

                                                     RENTER                                          HOMEOWNER

Rent                                               $1500                                                        

Utilities                                              270                                                       $400

Principal (P)                                                                                                    TBD

Interest (I)                                                                                                        TBD                                       

Taxes                                                                                                                 200 

Insurance                                             30                                                          65

Special Assessment

Maintenance                                        25                                                          35

Repairs                                                  25                                                        150

HOA/Condo Fees


Total                                                  $1850                                                      $850 + P & I

Setting the two totals equal to each other you can solve for P&I which is a $1000/month.

Note: A $1500/mo. average rent was chosen since it is the average national rent as of the end of 2019. 

Using a mortgage rate calculator you can now determine how much you can afford to pay for a home and keep your housing costs the same as renting.

Here is an extreme example of how much you can afford to pay for a home with no down payment and little or no money for closing providing you are a first-time home buyer.

Using the CNN mortgage calculator at https://money.cnn.com/calculator/real_estate/mortgage-payment/ choose the advanced options choice. Input $780 for insurance, $2400 for property taxes, 4.875% for the mortgage rate and $154230 for the home price. The 4.875% mortgage rate is as of March 2020 from the Navy Federal Credit Union (NFCU). It is a zero down payment with no private mortgage insurance required for members with an acceptable FICO score. Since your input numbers most likely will differ from the example you will have to vary the home price until you get your specific P plus I number. 

Money to cover all or some of your closing costs is available from many states. Some states offer outright no-payback grants while others require that the buyer pay back the grant once they sell their home. Google your state's housing website for first-time buyer closing cost help details.

Finally, in Southwest Florida and Southwest Michigan where I practice, a home price of $154230 as of late March 2020 enables home buyers to choose among 179 and 313 single family homes for sale respectively. The higher the rent you are paying now in localities like these the more home buying choices you will have.

Happy house hunting!      

Jim Lawson, DBA

Licensed Florida Broker Associate/Michigan Associate Broker

Licensed Florida Professional Engineer (Architectural) & Home Inspector

(239) 450-7178 (Direct)


Call, text or email at your convenience.

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Mar 23, 2020 10:16 PM
Tony Lewis
Summit Real Estate Group - Valencia, CA
Summit Real Estate Group Valencia & Aliso Viejo

Anything is possible with right amount of down payment.

Mar 23, 2020 10:28 PM
James (Jim) Lawson, DBA
DomainRealty.com LLC - Bonita Springs, FL
Broker Associate, RSPS, BPOR, HI & PE

Thanks for commenting Tony. Unfortunately many surveys show that a significant number of renters who want to buy a home believe that a 20% downpayment is required. This, of course, is far from true today. Mortgage rates are so low these days that in certain areas of the country even some zero down buyers can purchase a home. Plus their state might help with the closing costs too. The key factor is the relationship of monthly rental prices to the monthly cost of home ownership. If rental prices are high and affordable housing is available in a community then a prospective buyer will have some buying choices as shown by the example.  

Mar 25, 2020 05:26 AM
Roy Kelley
Retired - Gaithersburg, MD

Smart consumers are anxious to take advantage of the very attractive mortgage interest rates.

Jun 15, 2020 07:53 AM
James (Jim) Lawson, DBA
DomainRealty.com LLC - Bonita Springs, FL
Broker Associate, RSPS, BPOR, HI & PE

Very much agree Roy. However, it's not always easy to convince those who want to buy to act now

Jun 15, 2020 09:06 PM