By Ashley Robertson
With mortgage interest rates at historic lows and rent payments on the rise, NOW is an affordable time to finance a mortgage with a fixed monthly payment lower than rent. For so many of us, the benefits of buying a home outweigh the advantages of renting.
“There’s something permanent, and extremely profound, in owning a home.” ~Kenny Guinn
In this article, we’ll go over renting versus owning, what a monthly mortgage payment could look like, how much money you might need for a down payment, how your credit score can affect what you qualify for, how your income and debt are factored in, and more.
I understand how overwhelming some of this can feel, and we’re here to support and guide you whenever you need it.
Benefits of Renting
FLEXIBILITY -> If you plan on making a move in less than five-six years, then renting may be the better option for you.
LITTLE OR NO MAINTENANCE -> Landlords and property managers oftentimes will handle the necessary home repairs.
UTILITIES MAY BE COVERED -> Sometimes utility payments are included in your monthly rent payment. This would be negotiated with the landlord of property manager in the rental agreement.
Benefits Of Owning
If you plan to stay in your home for more than five- six years, buying a home could save you thousands of dollars over renting. And don’t forget about the noisy neighbors upstairs!
TAX SAVINGS -> Mortgage loan interest is deducted from your state and federal income taxes, and a portion of your property taxes may also be deducted—like Homestead Exemption in Florida that provides homeowners a $25,000 deduction. * Please consult a tax professional about your specific situation and the tax savings benefits of homeownership.
STABILITY -> The principal and interest payments on a fixed mortgage will not change during the loan term, whereas rent payments may increase annually.
BUILD EQUITY -> In many markets, owning a home allows equity to build over the years, gaining appreciation and growing your investment.
“The ache for home lives in all of us, the safe place where we can go as we are and not be questioned.” — Maya Angelou
How Much Money Do You Need For A Down Payment?
I have access to a variety of different loan programs--from 100% financing, VA with $0 down to FHA and several conventional options starting from as little as 3% - 3.5% for a down payment. Your down payment can be a gift from a relative, your own money you’ve saved—or both. It CANNOT be borrowed funds.
**The 100% financing program available today have stricter requirements on income, debt, and credit score to qualify.
There are some other closing costs involved to also be mindful of. We’ll get to that in a minute. But first, look at the above example of $250,000 purchase price for an Orange County home in Central Florida. The blue fields show ownership compared to the purple showing rent. The first year may not be that different in payment, but by the 9th year there’s a significant difference. The gains over that same 9-year period along with the tax benefit reflect substantial net gains for the homeowner.
Now, back to closing costs. The fees can vary somewhat and a lot of them are fixed. There are however, a few fees associated with purchase price, loan amount, and the closing date. You can head over here to access my Home Buyer Guide where I go over this--and some other home buying info--in more detail. Once you have a property in mind, you can let me know the address and price and we can move forward to configure a more detailed and accurate Cost Estimate that shows the complete breakdown of fees and funds needed to close.
Buyers can ask the seller to help pay some of the closing costs to reduce the amount they would need to have for closing. This is one of the many advantages of working with exceptional Realtors like Paul. He can negotiate the best price along with various other terms that are in your best interest.
How Much Can You Afford?
When it comes to what you can afford, it’s important to consider your monthly budget—not just the loan amount you could get. How much money do you have saved up for the down payment and upfront costs? Do you have any gift money from a relative you could use? How much extra money do you want to have every month that doesn’t go toward your house? What if an emergency happened?
These are just a few of the questions to consider.
A good mortgage lender (like me!) can help guide you to the best loan based on your unique budget and goals.
Getting Qualified – Four Main Criteria We Look At
Property, Assets, Income, Liabilities (Credit Score)
Just think of the word PAIL. The Property has to appraise for the purchase price or greater, and it must also be financeable. You will need enough Assets for a down payment and all closing and upfront costs. If the Seller is giving you a credit, we can factor that in. Your Income is broken down to a monthly amount and must be great enough to cover your monthly mortgage payment along with all of your other expenses. Your Credit Report will show your Liabilities and also provide your median score that will be used. We use debt-to-income ratios and credit scores to determine what loan program(s) are the best options for you. Your desired down payment is also a factor.
The things I’ll need from you to help you get Qualified:
• Your Personal Information (loan app) and permission to pull credit
• Your assets (current bank statements) and determine if some of your down payment will be gift funds from a relative.
• Your current income and job history for the past two years. Are you W2 or Self Employed?
• I’ll structure your debt-to-income ratios based on your income and liabilities found on your credit report, along with the best rates at the time of application to determine what you qualify for and show you scenarios with your monthly payment goals.
When you make an offer on a home, you will need to have an approval letter from your lender along with the contract, addendums, & escrow deposit. A Pre-Approval letter will make your offer stronger to the Seller—especially if you are competing with another buyer for the house.
Don’t Do List When You’re Buying A Home
- Don’t make large non-payroll deposits without talking to me, your lender
- Don’t open a different bank account
- Don’t change jobs, become self-employed or quit your job
- Don’t buy a car, truck, SUV, van, or any other vehicle
- Don’t buy furniture or appliances
- Don’t use credit cards excessively, let your accounts fall behind, or increase
- Don’t apply for any new credit accounts
- Don’t co-sign a loan for anyone
- Don’t spend money you’ve set aside for your home purchase
- Don’t take any Unpaid time off
This article provided you with some basic information to get you started on your Home Buying journey. As I mentioned before, your next step is to talk with your Lender (me!) and learn what price range you qualify within and get an idea of what your monthly budget and down payment will look like.
Let’s stay connected! We look forward to helping you with this exciting new chapter in your life! :)
Ashley Robertson is a wife, mom, native Floridian, and mortgage lender at Element Funding. She loves exploring easy and fun ways to learn, grow, and share with others. Wine and bulldogs are her jam. Head over to www.RobertsonHomeLoans.com for mortgage info and resources. NMLS 1780571.
Disclaimer: Primary Residential Mortgage, Inc., DBA Element Funding, NMLS #3094. PRMI is an Equal Housing Lender. This is not a commitment to lend. NMLS 1780571. 5401 South KIrkman Road Suite 490 Orlando, FL 32819. 407-367-5570. Florida Office of Financial Regulation MLD646.