We talked to a buyer recently who was trying to compare currently rental payments to a house payment. As the conversation progressed we realized that this first time home buyer didn’t really have all of the information about rent versus buying.
In fact, to make a fair comparison about rent versus buying, there are some important questions to ask.
Here are 3 questions we think you should ask yourself, if you are trying to decide if NOW is the right time to buy a home in the Raleigh / Cary area:
What Could I Buy for the Money I am paying in Rent???
We checked the published rental rates at Bexley at Carpenter Village,Village Summit Apartment Homes, Park and Market (North Hills) and Preserve at Briar Creek.
Rental rates for 3 bedroom, 2 bath Apartments ranged $1549 to well over $1600 a month. That was pretty eye opening, because the TOTAL payment for a home like the one pictured below is less than $1600! This Cary, NC home has a garage, 2237 square feet, 4 bedrooms, a garage and a yard!
Rent versus Buying?? Fact is – Rents are continuing to go up – most first time home buyers today are opting for LOW fixed rate mortgages.
Am I buying a House at the Absolute bottom of the Market??
My answer would be “who knows?” If we are not AT the bottom, we are pretty darn close, in fact we are seeing signs that it’s a Sellers Market in some price ranges already!
I can tell you just from watching houses in our neighborhood – multiple offers are coming in for properties that are priced correctly, have minimal maintenance needs, and are in a good location.
Look at that house pictured above. It’s listed at $219,000!
I can tell you this – mortgage rates ARE at the absolute bottom. If you are asking questions about rent versus buying a house… and you WAIT to do something… you could MISS this opportunity, and then have to settle for a smaller house when home prices and rates head higher!!
Consider This: If you were to pay $1,550.00 per month, for example, and the average rental payment increase was 4.000%, you would pay $100,743.60 in a 5 year period toward rent.
If you purchased a home and borrowed $205,000.00 with a 3.750% interest rate (4.05% APR) , and you paid $900.00 every year toward its maintenance, you would pay $77,838.22 in a 5 year period toward mortgage payments (assuming your Federal tax rate is 26.000%, you pay $1,800.00 in taxes each year and your annual home owner insurance policy is $450.00).
Is my credit ready for home ownership?
This is the single biggest question you need to ask. Purchasing a home takes a plan. You don’t just wake up one day and say – “Gosh, I think I’ll buy a house today!”
Deciding to be a Home Owner is a process.
The first thing you need to do is to make certain your credit is ready for home ownership. These days, that means that you need to have 2 out of 3 credit scores at or above 620. Depending on the program you are applying for, you might need scores a little higher. If you are a first time home buyer, or you have not owned a home in the last 3 years, you might qualify for NC Housing Finance Agency Funds.
TIP: One of the fastest ways to get the scores you need is to open 2 credit cards (can be secured cards like Capital One) and keep your balance at or below 50% of the credit limit. Also, if you are working with a credit “agency” that is helping with your credit, be careful if they are just disputing everything on your report. We are seeing people get rejected because of too many disputes!
Worried about coming up with the down payment funds required for buying a house?
I wouldn’t worry about that nearly as much as I would my credit picture. If you are a Veteran (thanks for your service!), you may qualify a for 100% no money down, Veteran’s Home Loan mortgage.
If you are willing to live in more “rural” areas of NC (near Raleigh that would mean areas like Holly Springs, Knightdale, Wake Forest, Fuquay Varina or all of Johnston County) you can see if you qualify to purchase a home using the USDA Home Loan Program. FHA only requires a 3.5% down-payment, and it can be a GIFT! or it can come from a Mortgage Grant from the State of North Carolina!
We love helping First Time Home buyers! If you have questions about rent versus buying, and qualifying for your first Home Loan in NC – Give us a call! Steve and Eleanor Thorne 919 649 5058, or connect with us on Facebook!