*To go straight to the Buying vs. Renting Calculator just CLICK HERE
Do you find yourself asking if you can afford to buy a home? Have you ever looked at the numbers and asked yourself if you can really afford not to buy your own home? Not every person, or every lifestyle is best suited to own a home – if you move on a semi-regular basis buying just might not be your best option. Everyone’s circumstances vary to some degree, and knowing what factors will most affect you is very important. For example, many first time home buyers don’t have a lot of cash to work with, so asking for the seller to pay for some of their closing/prepaid costs could be very helpful, because that would be less cash that would be needed at closing. There are a few places on this page that you can click to end up at a calculator to compare buying vs. renting, and if you are currently renting I would strongly urge you to play with this calculator a little bit.
*Also, if someone were to have the sellers pay for their closing/prepaid costs (or at least some of them) it would shift the curve on the chart for this calculator, and make buying cheaper sooner. If any of this doesn’t seem to make sense please feel free to email me and I’d be more than happy to clarify, or point you in the right direction. While you’re plugging in different numbers try eliminating some or all of the closing costs and see what happens to the curve – that change is why I like to help my first time home buyers in negotiating for closing/prepaid costs.
Here are some of the things that you’re going to want to keep in mind when you’re plugging in numbers:
- Get A Lender: Truly the first thing you should do if you want to start looking for a home is find a lender. A lender’s job is to help inform you of your loan options, and to help you secure the option that you want. Lenders are not Realtors/Real Estate Agents. If you have a lender, or an agent but not the other I bet they will gladly help you find the other piece of your puzzle. My dad is a lender, and one of the greatest people in the world, so I tend to recommend him first if he is available. A lender will be able to help you figure out what a lot of these numbers are. If you have questions you are more than welcome to contact me
- Interest Rates: You need to check today’s interest rates (Click Here to see today’s rates).
- Life of The Loan: try changing the loan from 30 year to 15 year and see how it changes your monthly payment, as well as how much you’ll be paying in the end. A shorter loan is just going to be a better deal, if you can afford it. One way to do things is get a 30 year loan and pay it off at the same amount/pace as if it were a shorter loan, but not be required to pay it off that quickly. Other than getting a different interest rate potentially it should work about the same.
- PMI – Getting Rid of PMI: PMI (Private Mortgage Insurance) is essentially a fee that people pay now to insure the large banks that will own most of our loans against homeowners being foreclosed on. Paying for PMI is a lot like putting piers into your house if you have structural problems – it’s seen as an expense that will not come back to you (the money is gone once you spend it). FHA loans (government loans – google it) now require PMI for the entirety of their loans, and you cannot stop paying for Mortgage Insurance at any point, as of now. Conventional Loans allow the borrower/buyer to stop paying PMI after they have 20% equity in their home – and with a large enough down payment could mean you’d never pay mortgage insurance. Ask your lender what your options are in getting rid of PMI.
There are several factors in buying a house that can make it much more expensive or much cheaper. Having money for a strong down payment, having reasonable credit, getting a shorter loan – these factors all matter. In the end it is all a matter of buying within your means. I plugged some numbers into the calculator, and these could vary quite a bit. But here is a possible breakdown of your costs if you are buying, versus if you are renting:
*Feel free to plug in the numbers that I used, and adjust them according to whatever your lender recommends. They will probably tell you over the phone or email what some of these numbers should look like for you.
If you have any questions about the home buying process please feel free to contact me however you’d like. You can: call, text, email, or Facebook Message me. Thanks for reading.