THE TIME IS NOW
If you’ve been contemplating the purchase of a home, the time to make your move is NOW! While buying a home can be a big decision, waiting too long could actually hurt your chances of getting the home you want & need. Read on and find out why…
Home prices in Cache Valley are appreciating in value. From 2017 to 2018 alone, we saw a 13.7% increase of the cost of a home, and at that pace, it will become more expensive the longer you wait. While new of costs increasing may seem all bad, there’s good news for those considering homeownership. Interest rates have remained at record lows, which helps maximize your purchasing power while keeping your monthly payment low. With no indications of the market slowing down, it’s important to make the move sooner rather than later.
RENT vs. a MONTHLY MORTGAGE PAYMENT
With mortgage rates still well below historic lows, you have a great chance of getting a home the size you need, with the amenities you want.
If you’re thinking “no, that’s not possible. A mortgage is way more than my rent payment!” Would you be surprised to learn that it might not be?
Let’s compare the average rent payment to a monthly mortgage…
Currently, the median rental rate sits at $1014 per month. 100% goes to your landlord, while no equity is earned. Your investment is in your landlords growing wealth. No tax benefit is gained, no added benefit of market appreciation. You likely handed over a heafty deposit, and when your rental agreement is up, you could see your monthly rental rate increase, too.
A person making the median income in Cache Valley of $52,000 may qualify for a loan on a $200,000 home, making the monthly payment (principal & interest) of $998. This amount is calculated at current interest rates, with little to no money down. The benefits? Many! Tax benefits, appreciation, and with each payment made, you gain equity in your home.
IT’S A NO-BRAINER
Your monthly mortgage payment is a form of “forced savings” building your net worth with each and every payment. The Joint Center for Housing Studies at Harvard University focused on homeowners and renters over the age of 65. Their study revealed that the net worth of a renter sits at $6,710 while that of a homeowner is $319,200 – almost half of which is the equity in their homes. A major difference! But equity is not the only thing that’s gained. There’s more…
Homeowners move far less frequently than rents, bring stability to neighborhoods & communities. This strengthens social ties among neighbors, who then work together to promote a safe & orderly environment in their area. They are more invested in their community and tend to care more for their property.
Better educational outcomes are linked to homeownership. Studies show the decision to stay in school by teenagers is higher for those raised in home-owning parents. The life management skills & behavior needed to maintain a home is seen to transfer to the children of homeowners.
Homeowners have a financial interest in ensuring that their unit is well-maintained and repaired. Landlords charge rents based on the expected level of “use” that will be caused by their tenants, whereas, homeowners have a financial interest in ensuring their property is cared for and well-maintained.
Homeowners have a much greater financial stake in their neighborhoods than renters. Because of this, several studies have found that homeowners tend to be more involved in their communities than renters. For example, homeowners were found to be more politically active than renters, participating in elections much more frequently than renters.
In addition to being more satisfied with their own personal situation than renters, homeowners also enjoy better physical and psychological health. Homeowners report higher self-esteem & happiness than renters. They are more likely to believe that they can do things as well, and they report higher self-ratings on their physical health.
Before you renew your rental contract, meet with a local REALTOR® and find out if homeownership is possible in your near future. Owning a home embodies the promise of individual autonomy and is the aspiration of most American households. Homeownership allows households to accumulate wealth and social status, and is the basis for a number of positive social, economic, family and civic outcomes.
READY FOR A MORTGAGE? What NOT to do...
It’s exciting to start looking for your first (or next) home. The last thing you want is something to jeopardize your ability to obtain a mortgage. As a borrower, there are several things you should AVOID doing that could harm your chances of getting the best rate possible, or worse yet… get turned down for the loan. By educating yourself early, you’ll take the right steps towards getting your loan approved and avoid common pitfalls along the way.
DO NOT TAKE OUT MORE LOANS! Taking out new loans before applying for a mortgage (think new car, boat, etc.) increases your debt load and a lender may question your financial responsibility. Lenders will consider the amount of debt you have, and compare those debts to your gross monthly income. If you are financially overextended, you might not be dependable to make monthly mortgage payments. If you are viewed as a high risk, you may qualify for a lower loan amount or higher interest rate.
DO NOT APPLY FOR NEW CREDIT CARDS OR RACK UP CREDIT CARD DEBT! Credit card balances are also considered as a monthly recurring expense, and a new credit account will increase your DTI (debt-to-income) ratio. Carrying too much credit card debt is one of the most common reasons for mortgage rejection. It makes you a risk in the lenders eyes, and it will affect your credit score. If you have existing credit accounts that are not being used, keep them open. Limit use of credit cards before applying for a mortgage loan.
DO NOT SPEND YOUR SAVINGS! Lenders will want to verify that you have the funds to cover the costs of closing on a home, as well as the ability to repay back the loan. Your savings is something that lenders will verify, and not only do they want to see liquid assets, they want to see history of maintaining it. Save as much money as possible prior to obtaining a mortgage. Avoid large purchases that deplete your savings. A beach vacation might be tempting, or that new flat-screen TV you’ve wanted before the big game. But these things chip away at your much needed cash reserves.
DO NOT MAKE PAYMENTS LATE! Lenders use your credit score as a risk-assessment tool. A higher score indicates a lower risk for the borrower. And the reverse is true — a lower score indicates a higher risk for the lender. Do everything possible to protect your credit score when shopping for a mortgage loan. Your payment history accounts for 35% of your overall score, more than any other single factor. One late payment can drop your score by 50 points or more, depending on the circumstances. That’s the last thing you need before applying for a mortgage.
DO NOT MAKE MAJOR LIFE CHANGES! Lenders want to see a hisotry of steady employment and income. In most cases, they’ll require steady employment for at least two years. Employment is a key qualification item during the mortgage application process. If you change jobs within the same field, and secure an equal or greater level of income, you’re likely not to have problems. But if you make a major career change, or it your income decreases from your previous positions, you could hit some snags during the underwriting process. Bottom line… maintain the status quo.
Homeownership is a major milestone in one’s life and provides the financial security to make a major investment and then watch it grow over time. A REALTOR® will help navigate you through the unfamiliar territory of home buying. They’ll suggest lenders that will best match your needs and keep you within your monthly budget. A REALTOR® will guide you from start to finish. Make the move to secure your financial future today!