Dear Jill,
My husband and I are looking into buying a house when our lease is up at the
end of March. We will not have 20% to put down on a house so should we rent
longer to save more for the down payment, or should we go ahead and buy with
the down payment we have? The area is growing so quickly and house prices are
going up so I don’t want to rent forever trying to save up enough just for the
down payment! Please let me know what you think is the best plan.
Rebecca
Rebecca, thanks for your question – it’s a good one. I have advised
many people in your position as first time buyers to go ahead and buy rather than renting, because
when you do the math it just makes more money sense. Regardless of all of the doom and gloom we are hearing right now about the mortgage industry, there are actually some great loans
available to the consumer with decent to good credit. I spoke with a lender today about current loan programs, he tells me that you can get a 95%
loan (only putting 5% down) with no PMI (Private Mortgage Insurance) payments
at all. This particular program only raises your interests rate by a quarter of a percent
which is still a great rate considering they are incredibly low again right
now. Depending on credit scores, you could potentially get a 95% loan at an interest rate of
approximately 6.5%. (source Fairway Mortgage)It just doesn’t make sense to rent right now when it
is earning you zero equity and you’re receiving no tax benefits.
Another good reason to buy is due to your position in the market. This is prime time for buyers who don’t have homes to
sell to take advantage of the low rates and the softer real estate market. It’s
a wining prospect for renters to move into homeownership while prices are still down
and before rates go back up again. I suggest that you contact a mortgage
professional and have them show you the different options that might be best
for you. They can tell you how much money you can comfortably spend on a home
by telling them the payment that you would be comfortable paying on a monthly
mortgage payment. Then from there, a Realtor can show you homes that fit into your price range.
Add to:
Thank you so much for taking the time to answer me. I searched all on the internet for some form of answer and everything was very vague. I greatly appreciate your time. One more question, though… our lease will not be up until the end of March. Does the housing market change that abruptly to where I should be worried about everything going downhill before our lease is up? We live in an area that is growing up extremely fast. I don't think anything will happen, but, then again, this is my first house and I have never really looked into buying before so I am very uneducated in the real estate field.
Again, thank you so very much for your help already!
Posted by: Rebecca | November 13th, 2007 12:09 pm |
Awesome! Thank you so much for your help. I'm glad to know I am thinking along the same lines as you. I am sick of throwing away all of this rent money for nothing! I have discussed all of this with my husband and we have decided to plan on house shopping in the next few months!!! Thanks again!
Posted by: Rebecca | November 13th, 2007 12:09 pm |
Good luck. I am glad I could help. Let me know if you have any other questions along the way to home ownership!
Posted by: Jill | November 13th, 2007 12:37 pm |