To Buy or To Rent?

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Real Estate

Three more answers (assumptions) I’d like to question.

A: I can’t afford to buy. So I have to rent.

Q: Is that really true? You might be surprised. I would talk to a mortgage professional just to be sure. They will "Prequalify" you based on your income, savings and debt. That way you will know exactly how much you can afford. 

A: Doesn’t matter, I don’t have enough in savings to make the required 20% downpayment.

Q. Do you have at least 5%? I get it. Been there. And 20% is “best,” but it's not required. If you have little savings, plus your compensation package is low, owning even a modestly priced home may not be a good idea, as you’ll need some buffer for the inevitable repairs. However, if you can afford a monthly mortgage payment equal to no more than 30% of your income, and if you have good credit, and not too much debt, many mortgage companies will offer you a product at 5% down, for a conventional loan. And if you're military, as I'm sure you already know, you can put 0 down!  If you fall below a certain income level (varies by program and state), there are even 3% mortgages offered. In some states there is also closing cost assistance if you meet certain criteria. Worth looking into!

A: I definitely want to put 20% down, because less than that and I have to pay mortgage insurance. Plus, I doubt I’ll be able to sell my current house before I have to buy one at my new location. And I need to sell to have the 20%.

Q: Have you ever heard of recasting? A lot of people haven't. I learned of it when I was in that situation. We put down 5% on our new home, and then when our "old" house sold, a few months later, we took the money from the proceeds and “recast,” the mortgage. That cost us $150.00 total in fees. It required very simple paperwork, and there was no "re-fi" involved. So, while we did have to pay a couple mortgages for a few months, ultimately we ended up with the lower monthly payment, and best of all, the mortgage insurance went away, instantly. Not all companies will do this, but your agent may be be able to find one that will.

I guess overall my point is, buying a home can be more do-able than you think. It does take time and energy both to accomplish the purchase and to maintain a home, but that 's what your agents (real estate and other professionals) are for. To do the heavy lifting! And in the end, it's worth it as home buying is the surest way to build "wealth" over time.