Tuesday, November 1, 2011

Rent Versus Buy Debate Revisited

Buy a house now! Keep renting - Wait out the market!

How many times have you read a similar article about the pros and cons of buying a home versus renting. Of course, there are many points on each side of the debate that are very valid. Each point must also be evaluated by the audience on the merits to their own particular circumstances. 

The attached document shows graphically where the numbers fall. It is based on the following variables: FHA 30 year fixed rate purchase loan, credit score of 640 minimum, normal property taxes and homeowners' insurance, property appreciation & rent increases of 2% per year. Most people stay in their homes 5 years but the longer term benefits after 12 years are also illustrated. 

Even though the monthly payment of $919 is more than the expense of renting at $800, the amount of monthly expense is lower when buying when factoring in the tax deductibility of mortgage interest, mortgage insurance, and real estate taxes. Further, since the principal amount of your payment is actually going toward your equity, the net amount of your monthly housing expense is even less.

The home price used in the example of $125,000 would actually rent in a range of $1000 to $1200 per month. See? You can buy more house than you are renting now and do it for less money!

Most home prices in Oklahoma have remained very stable throughout the burst of the bubble in most of the rest of the country. There are some bargains out there and you should engage a REALTOR® to help you find those bargains.

But before seeking help finding a home, you need to find out how much you can afford. This leads to the best bargain in housing today. Rates continue to be at historic lows, and I will write in an upcoming post about the potential cost of waiting out the real estate market for the lowest home price possible.

Every person's situation is unique. As much as we would like things to be cut-and-dried, I can't recommend anything to any prospective buyer without first having some conversation about your needs, your goals and your circumstances.

Call today to get your self on the Path2Buy your new home.

Tim Epps
Sr. Loan Officer
Fairway Independent Mortgage Corp

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