Active Adult Communities In Aurora, ColoradoHere are four benefits of retiring in an active-adult community:LOW-MAINTENANCE LIFESTYLEGet rid of the lawnmower and snow shovel. After all you’ve
5 Reasons Buying A Home Is Better Than Renting
5 Reasons Buying a Home Is Better Than Renting
If you’re looking for a place to live, you may be trying to decide whether it’s better to buy or rent. Renting does have its advantages: there’s less up front investment and you can move when your agreement or lease is up without having to sell. Most people will rent to get an idea of the where they want to live when they move to a new city.
However, for most people, it’s a much better option to buy a home rather than rent it. There are several reasons for this that range, from emotional – it’s your home – to analytical – but the truth is YOU SAVE MORE MONEY when you buy.
Numbers Don’t Lie
When your mission involves helping people secure the financing they need to buy a home of their own, you spend a lot of time looking at numbers.
According to a July survey conducted by Trulia, a leading real estate industry site, on housing regrets, 41% of renters wish they’d bought a home instead of renting. When you do the affordability math, there’s good reason for this.
In a separate data set released in May, Trulia found that it’s cheaper to buy than rent in each of the nation’s 100 biggest metro areas. That bears repeating. Buying was cheaper than renting in every area.
It’s an Investment
It’s also worth noting that we’re in a cycle where home values have been steadily rising. When you own your own home, an environment of rising home values means you not only gain equity in your home when you make your payment every month; it also rises with the value of your home.
People often think of a home as being a roof over their head and also a gathering place for friends and family. While it is both of these things, your home is also an investment. For each month you make your mortgage payment or your home value rises, it’s a bit like making another small deposit in a building bank account.
Down the line, you have the option of converting the equity you have in your home into cold, hard cash. This gives you financial flexibility. You could use the money for home repairs or improvements, but you could just as easily use it to jumpstart your child’s college fund or give your 401(k) a boost so you can retire on a beach somewhere before your parents did.
When you rent, someone is seeing the benefits of those equity gains: your landlord. It’s time to take some of that investment power for yourself.
Dismantling Down Payment Myths
There’s a misperception that persists from a time before many of us were born that you shouldn’t even bother applying for a mortgage unless you have 20% to put down. That may have been true at one point in history, but it’s simply no longer the case.
Major mortgage investors like Fannie Mae, Freddie Mac and FHA each have options that allow prospective buyers to get into homes with a little as 3% – 3.5% down. Buyers looking at one-unit properties shouldn’t expect to have to put more than 5% down in most cases.
There are a programs where homeowners don’t have to make a down payment if they qualify. The most common one that people are familiar with is offered by the Department of Veterans Affairs. The VA has a program for veterans, eligible active-duty service members and their surviving spouses that features a no down payment option.
There are advantages in making a higher down payment. The amount of your down payment is one of the factors that can enable you to get a lower rate. With a higher down payment, you can also avoid paying mortgage insurance fees or at least shorten the amount of time you have to pay it.
Still, if the fact that you don’t have $40,000 in a savings account is stopping you from getting a home of your own, it’s time to blow that mental stop sign and go full speed ahead toward your dreams.
Although any down payment is not an insignificant amount of money, saving doesn’t have to be hard.
Finding the Rate That Fits You
The wisdom of our parents’ generation when it comes to home buying is to get a 30-year fixed-rate mortgage. It’s sort of the set it and forget it strategy.
A 30-year fixed mortgage still makes a lot of sense for the right type of person. If you can’t see yourself moving elsewhere in the foreseeable future, the 30-year fixed mortgage offers a lot of security. However, historical trends among home buyers suggest Americans may be paying for rate certainty they don’t actually need.
The National Association of REALTORS® said in its Profile of Home Buyers and Sellers 2016 that the average homeowner stayed in one house for a period of 10 years. First-time home buyers in starter homes with small families may need to move into a bigger space even sooner. Why take a 30-year rate when you might be in the home for seven years or less?
If you don’t plan on your current home being a forever home, it might make sense to look at an adjustable rate mortgage (ARM). Although all ARMs have 30-year terms, you’ll commonly see a reference to a 5-, 7-, or 10-year ARM. This timeframe refers to a period at the beginning of the loan term when the interest rate is fixed. During this initial period, you can get a lower rate than you would with a fixed-rate loan over the same 30-year term. This is because bond investors don’t have to try to adjust for inflation 30 years down the line. They have the opportunity to adjust more closely with current market rates once the fixed period is up.
However, if you plan to be in your home for only a short period of time, you can use this system to your advantage. If you have a 7-year ARM and you sell in year six, you’ll have taken advantage of a lower fixed rate and moved on your next house before the rate ever adjusts.
If you do decide to stay in your house beyond the fixed-rate period, your rate will go up or down every year depending on market conditions. It’s important to note that if your rate does rise, there are limits to how much it can rise initially, every year after that and over the term of the loan. Your rate cannot rise indefinitely.
If you would like to remain in your home after the fixed portion of your ARM expires, but you’d like more certainty moving forward, you may be able to refinance into a fixed-rate loan.
Every situation is different. Carefully consider your financial situation to pick the loan that’s right for you.
When you initiate a loan, make sure your lender goes through all of the costs for you. The costs will get rolled into your loan, but there are many line items that need to be explained so you are not overwhelmed by the process.
There’s one more great reason to get a house – you can do to it whatever you want. Unlike a rental, whether your idea of the bathroom paint scheme includes calming lavender or loud pink polka dots, you have the freedom to make that decision. If you want an industrial kitchen to perfect your avocado toast featuring homemade bread, you can make it happen.
It’s a space to rest your head and also make the dreams you have a night come to life during the day with your family and friends around you.
Sell or Buy your way, traditional or by the auction method: Tamara Whelpley has lived and worked in Denver for over 30 years and is an expert in Washington Park, Cherry Creek, Highlands and throughou....
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