The 4 biggest myths about buying a home? A recent study by the Joint Center for Housing Studies at Harvard University revealed when renters were asked why they do no plan to own in the future, financial constraints were a more common response than the perceived lifestyle benefits they may receive from renting. Today, we want to go over those financial challenges and see if we can put some fears to rest and also clear up some misconceptions. Here are the top four financial hurdles that cause renters not to buy:
Well over 50% of renters consider this as a financial barrier to homeownership. However, study after study has shown us that there are major misunderstandings about what is required to purchase a home.
The biggest misconception is the amount of a down payment required. A recent survey revealed that 44% of respondents believed that a 20% down payment was required. In actuality, mortgages are available with as little as 5% down (and even 3% in certain situations).
The same survey showed that 30% of respondents believe that only individuals with ‘high incomes’ can obtain a mortgage. In actuality, there are several programs intentionally created to help moderate income families buy a home of their own (look at the FHA program for example).
You Do Not Have Good Enough Credit to Get a Mortgage
The survey mentioned above showed that 64% of respondents believe they must have a “very good” credit score to buy a home. Most people don’t realize that the average credit score for closed loans has actually dropped 24 points in the last two years. For more information on credit scores click here.
It’s Not a Good Time to Buy a Home
Determining when is the right time to buy a home from a pure financial calculation can be difficult. There are two elements of the cost of a home: the price of the house and the mortgage interest rate. When considering a purchase, you want to have at least an indication where prices and mortgage rates are headed. According to over 100 experts, house values are expected to increase by almost 20% between now and 2018. And Freddie Mac recently projected that mortgage rates would be as much as one full point higher by this time next year.
With both prices and interest rates projected to increase, now is the perfect time to buy a home.
This is a myth that doesn’t want to die. However, Trulia recently reported that, in fact, buying is actually dramatically cheaper than renting. Here is what they said:
“Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas. In fact, buying is 38% cheaper than renting now, compared with 35% cheaper than renting one year ago.”
What’s Cheaper in the St. Louis Area-Renting or Buying?
The chart below will show you the difference between St. Louis and other areas of the country. Notice the percentage of income going to renting versus buying a home: Full Article
|Metro Area||Median Price of Home||Median Price of Rent/Month||% of Income Needed to|
Afford a Home
|% of Income Needed
to Pay Rent
The bottom line:
Everybody is paying a mortgage. You’re either helping pay off your landlord’s mortgage … or you’re paying your own.
Call Finding Homes for You at 636-532-4200 and find out how our team can help you make the leap into home ownership!