What Can My Rent Check Buy Me?
If you’ve been renting a home for 30 years, you’re still paying rent – and always
will. But own a home with a 30-year mortgage and after 30 years you’ll live rent-free,
because you’ll own that home outright.
If that isn’t incentive enough, how much money are you spending on rent? A $1,500
rental will cost you $18,000 in just one year, $90,000 in five years, and $180,000
in 10 years. All that money goes to your landlord – not your future. Still think
you can’t afford to buy? You can’t afford not to.
With current interest rates so low, many first-timer buyers are taking the money
they’re currently spending on rent and putting it into a mortgage. You may not be
able to buy the same house or condo that you’ve been renting — you might make some
compromises — but you can probably buy something suitable and then upgrade to something
better down the road. Homeownership is about getting into the game and growing your
wealth in stages.
The concept is simple: your rent check can be invested into a piece of real estate
that you own. Unlike rental costs that get you nothing long term, your mortgage
payment gets applied toward the principal of the house, increasing your equity in
it over time and building real wealth.
So, where do you start? First find out what you can afford for a down payment and
a monthly mortgage payment. Then, sit down with your
Prudential Locations Realtor, who will help you map out a personalized plan
to meet your unique needs and goals. Your Realtor can help you gather a team of
experts, including a mortgage lender and tax consultant. He or she can also help
you put your best foot forward.
Credit History
An issue that may arise for first-time buyers is their credit history. It’s helpful
to know what the lenders will see. You can request a credit report from a number
of agencies. Make sure it’s up-to-date. If you have credit problems, it’s important
to fix them. If there are mistakes in your credit report, it’s important to correct
them.
Down Payments
One common stumbling block to homeownership is coming up with a 20 percent down
payment. While it’s true that the more money you have for a down payment, the easier
it is to get a loan, it’s not a rule. There are programs and loans available that
only require 3 to 5 percent down. VA loans are a great example of one of these programs,
and still the single best way for anyone who qualifies to buy a home with minimum
to no money down. Ask your Prudential Locations Realtor or your lender for more
information on VA and FHA loans.
Creative Financing
You can also explore creative ways to reduce some of the upfront costs of buying
a home. Because of today’s markets, sellers are becoming increasingly more flexible.
Some sellers are willing to consider personally financing some of the sales price.
Others are willing to assist with closing costs.
Other Assets
Consider whether you have access to money in other places, that can be used for
the down payment. For example, money in trust (such as a family trust) may be used
to purchase real estate. Money in accounts such as a 401K or IRA plan may also be
eligible for investing in real estate.
If you’ve dreamed of owning your home, there’s no time like the present to take
advantage of today’s market to invest in yourself and your future.