Facts & Myths of Buying vs. Renting
The barriers to home ownership aren’t what they used to be. In the 1970s, you couldn’t buy a home without a 20 percent down payment. Today, the essence of the American dream often can be achieved with little or no money down, depending on your financial situation and where you’re buying a home. That can also happen if you have a special qualification, like buying a rural property, you’re a veteran or you’re in specific career categories like an educator. Private mortgage insurance also expanded who could qualify for home ownership. With interest rates still near historic lows, it’s a great time to think about becoming a homeowner.
Here are some facts and myths when it comes to a home-buying decision:
FACT: It can be a great investment. The housing market crash of 2008 was tough on homeowners, who lost an average of 32 percent of their home value. But the market has rebounded in a big way since. In May 2019, the median price of a single-family home was up nearly 5 percent from last year, marking the 87th straight month of year-over-year gains. With prices expected to continue to go up, buyers are flooding the market. Homes are drawing multiple bids, and some are going into contract even before they’re advertised. Every region, city or side of town can have a different experience, but historically a home has been a solid investment. It’s one you can use rather than just own and it’s an asset you can enhance to add even more value.
MYTH: I need perfect credit to buy a home. While you may need a stronger credit history than past years to get a mortgage, you do not need perfect credit. The higher your score, the more options you have, and it will affect your loan approval and interest rate. But if your finances are in order, you can improve your credit by paying your bills on time, keeping your debt-to-income ratio below 20 percent, not maxing out your credit cards, and reviewing (and correcting) any errors on your credit report.
FACT: You’re routinely saving. Because your house is an asset, every payment you make toward the principle is like sending money to yourself. Even if you haven’t paid off the mortgage, you’re building equity. You also can borrow against that equity if you ever need to for an emergency or, for example, to pay for a once-in-a-lifetime trip. Talk to your tax professional about the potential tax benefits of home ownership as well. With rent, you get a roof over your head, but compared with buying a home, you’re losing out on having your money work for you.
MYTH: Home ownership is too expensive. Putting 20 percent down on a home is not the golden rule. According to Freddie Mac, expect to pay a minimum of 3 percent for your down payment and typically between 5-10 percent. Factors that determine the amount required include the value of the property, finance amount, credit rating and debt-to-income ratio. A first-time homebuyer or a household of modest means can also ask about potential sources of down payment or closing cost assistance.
FACT: Interest rates are (still) historically low. More than 30 years ago, mortgage interest rates on a 30-year fixed loan were between 12 and 13 percent. As recently as 2007 they were pushing 7 percent. For the past seven years they’ve generally hovered around 4 percent or less. It’s a wonderful time to be a homeowner in terms of what it will cost you over the life of a loan to purchase your next home.
MYTH: The mortgage process is too complicated and risky. The right resources and information can make the home-buying and mortgage process much easier to understand. Talk to one of our experienced lenders and they can discuss all the options available to you. They can review your income, expenses and savings to help determine the mortgage loan you qualify for.
FACT: Your property, your choice. You don’t have anyone saying you can’t paint the walls, hang things up, or have certain pets. If you buy, you can do all those things and be as creative as you like. Your privacy also improves. Strange noises, loud conversations and annoying music from the apartment next door become a thing of the past.
All pretty good reasons, right? Do you still have questions?
You don’t need to know the exact home you want to have a conversation with us. We want to get to know you and understand what homeownership means to you. Then we can offer you information and trustworthy guidance based on generations of providing home loans to the local community, so you can feel confident you’re making an informed decision.
Call or visit us today so we can give you the personal attention you deserve.