If you’re thinking about buying a home and you like saving money, 2016 is the year to become a homeowner. Thanks to relaxed requirements, it’s easier than in previous years to unlock the door to your dream home. Plus, now is an affordable time to buy, and owning a home comes with many benefits that renting doesn’t offer.
Here are some reasons why you should consider buying this year:
The Cost of Rent is Insanely High
Rental rates across the country are surging and don’t appear to be slowing down anytime soon. Rents increased an average of 3.7% from 2014 to 2015. But they spiked even more in larger rental markets, jumping up a whopping 14.9% in San Francisco, 12.9% in San Jose, 11.6% in Denver and 9.5% in Kansas City, Mo.
Despite such increases, most renters’ incomes have not gone up, raising an issue of affordability. In the last decade, the number of renters spending more than half of their incomes on rent has risen from 7.5 million to 11.4 million. Yikes! That’s a lot to be spending on housing each month.
These days, it’s cheaper to own a home. Home buyers can expect to pay about 15.3% of their incomes on mortgages.
You’ll Build Equity
Unlike renting, owning a home is an investment that builds equity. When you write a rent check each month, sure, you’re paying for a place to live, but you don’t get to see the value of the building you’re living in appreciate. If you’re planning on sticking in a particular area for at least 5 years, it might be in your best interest to go ahead and buy. After those 5 years are up, you’ll already have equity in your home. You can’t say the same after 5 years of renting.
Low Interest Rates
Interest rates are historically low right now, at around 4% for a 30-year fixed-rate mortgage and around 3% for a 15-year fixed-rate mortgage. Rates that low are hard to beat – it wasn’t that long ago that they were in the double digits. Not many people in years past have been able to say they got their dream home for a 4% interest rate. By locking in a low rate now, you won’t have to worry about when rates will start creeping back up again.
Down Payments are Lower
Over the past few years, many lenders have lowered down payment requirements. That’s especially helpful for home buyers who may have a reliable income and good credit, but who haven’t been able to save much money for a home due to high rental rates. In some cases, down payments can be as low as 3% to 5%. Federal Housing Administration loans, or FHA loans, also usually come with lower down payments, around 3.5%. FHA loans require mortgage insurance, but the monthly premiums for that insurance has dropped, making them more affordable for potential home buyers.
You Don’t Need to Have Perfect Credit
Credit requirements for buying a home aren’t nearly as stringent as they once were. Of course, the higher your credit score, the better, but if you have less-than-perfect credit, your dream home isn’t necessarily out of reach. A score of 720 or higher is usually considered to be outstanding by most lenders. However, in spring of 2014, 33% of loans were for borrowers with a credit score below 700. That percentage was up from 27% in 2013.
At PrimeLending, we understand that our customers have different budgets. That’s why we offer a variety of home loan products tailored to your individual needs. We’re here to make home loans simple, and we’re committed to supporting you throughout the process.
A PrimeLending home loan expert can get you started today.
from the PrimeLending blog, by Mandy Jordan