Many first time homebuyers wait to enter the market because they think they need a 20% down payment, or don’t realize the benefits of buying sooner than later. If that’s you, please keep reading!
According to the Confidence Index Survey by the National Association of Realtors, 61% of first time home buyers are putting down zero to 6%. With lending programs such as FHA, VA, USDA and conventional loans with 5% down, there are many options. The lending standards for receiving a gift as a down payment have also eased up. These gifts can come from family, your lender and there are even loans which allow crowdfunding such as a gofundme page. Seriously!
Another common concern is credit score. While there are minium score requirements, there are programs that don’t require a score as high as you might expect. My best advise here it to reach out and get some information about the different lending programs available. They’re out there.
Now that we’ve debunked the belief that you need 20% down, and your credit score doesn’t need to be perfect, let’s address the question if purchasing is better than renting. While there is a lot of advice out there that buying is better, let me give you a quick synopsis of why my clients have chosen to buy after renting.
One, if you’ve been in the rental market for any time in the Summerville / Charleston area, you’ve seen the rents increase drastically over the years. A mortgage payment (principle and interest) remains the same for the life of the loan. Imagine in 10 or 20 years, still having the same monthly payment for housing. If you continue renting, this will most definitely not be the case.
And in today’s market, you can actually own a home for less than you can rent. Don’t believe me? Here’s a look at the numbers from the MLS for a 3 bedroom home with 1000-1500 sft in Summerville:
Median rent: $1,325 / month with 18 homes actively for rent
Median sales price: $184,000 with 56 homes actively for sale
using 4.25% interest rate, 30 year FHA loan with 3.5% down payment ($6,440) and estimating $350 for taxes, insurance and private mortgage insurance, your monthly payment would be $1,223.
Several things to note, there are less rental homes on the market than homes for sale and a monthly payment is potentially $100 less per month than renting.
Two, historically, homes will appreciate in value creating wealth for you in the long term. History shows a healthy market will sustain an average of 4% appreciation per year. If you purchase your $184,000 home today, in 10 years that same home would be worth $274,313. That’s equivalent to gaining over $9,000 a year in net worth, all by just buying your home and paying your mortgage.
Three, and I think most importantly, a home provides roots. It can give one a sense of stabilty that renting never will. It’s your home, you own it. You can paint, move walls, change floors, plant flowers and everything you do improves your investment, not someone elses.
If you want to talk more about your particular situation, feel free to give me a call. It’s a great time to purchase.