Rent or Buy?
The growth in real estate sales over the next few years will be, in no small part, because of renters turning into buyers.
I turned 61 today and was a renter turned buyer in 1977. The home I bought cost $37,050. (FHA Appraisal price). This morning it took me less than two minutes to find a copy of the deed on line. (Here). I was 24, a salesman for National Starch and Chemical in Bridgewater NJ, and sat down one night and did a rent or buy comparison. Owning was not only cheaper, but I got the on the appreciation escalator. I went out that weekend and found a house. The address was 23 Brookside Avenue, Old Bridge, NJ.
I think my salary was about $33,000/year back then. There were no first time home buyer programs that I can remember, but after doing some simple math I knew that I wanted to own. (I did buy FHA with only 5% down)
There are a number way to do the “simple math” with rent or buy calculators you can do for yourself or your friends. There is a simple on above. Microsoft also has a great rent/own template here. Excel didn’t exist for me back them, just a yellow legal pad and a T Bar chart. The calculators I have linked you to will incorporate the most important part – the tax savings (after all interest and property taxes are income tax deductible) – and the appreciation that you might expect owning real estate.
Most renters don’t realize that they can qualify for a mortgage.
So here is the first step. Get a pre- approved for a loan amount. Not just pre qualified- but pre approved. This is important. You can do all the home work ahead of time, get your tax returns and paystubs and bank statements and a professional loan originator can counsel you as to how to clear up any issues before they arise. A good Realtor will help you do you own buy or rent calculations. Once you know how much the lender will approve you for, you can go shopping. Don’t think you can get pre approved? You may be surprised. Interest rates are low and banks are anxious to lend. A credit score of 640 I will work, of course higher is better. How much money will you need? 95% loans are available, but I would also budget another 5% for closing and move in costs.