As the Summer approaches, the time has come to SERIOUSLY think about taking the next step in your prosperous future ahead by thinking about either buying a home. There are various reasons for buying now including but not limited to first time home buying instead of the continuos renting cycle (see previous post on renting vs buying in Philadelphia), purchasing your first investment property or starting a business.
1: Buying vs. Renting:
Why buy now, you might ask? Well I am not here to give the “hard sell” on buying a home because I am sure the decision to buy or not to buy is far more personal than just reading these words. However, let’s start with what you may be doing otherwise, RENTING. Renting is convenient and safe but not quite stable and self-determining. Although it might be said that even purchasing a house requires you to be beholden to the “bank” replacing the “landlord”, the structure of a mortgage allows for OWNERSHIP. Think of it sort of like the difference between leasing a car and purchasing a car. At the end of the lease (which is often shorter that a purchase), you are responsible for mileage, damage, and wear and tear on the car. You also need to have additional insurance because the “owner” may not trust that you will adequately take car of “what is NOT yours”. Purchasing a car, you get the car loan and the car itself is collateral for the loan you took out with the bank. So, it is your as long as you pay what you promised to pay. If you don’t (just like not paying rent) you can be forced to give back the property. The process to “repossess a purchase as opposed to a lease is much more involved because you have more RIGHTS TO THE PROPERTY. Buying a house is similar. You can do major construction, rent it out, put a huge deck, buy 25 cats, and even renegotiate to loan you were given to take advantage of “equity” you built in owning the now. EQUITY is the big difference. As you pay a mortgage you gain EQUAL ownership and financial rights to the property of which you can do what ever you choose. I’ll stop there…. oh forgot to mention the TAX BENEFITS. You pay rent and receive NO CREDIT in the eyes of the IRS or state BUT with each dollar paid of interest on your mortgage and the taxes you pay on the house, you get that credited back in TAX benefit. THIS IS HUGE.
Recently, as the market begins to rebound, many banks have begun to give more incentives for those willing to take on the responsibility of purchasing a home. A HUGE incentive are programs like the First Front Door Program sponsored by the FHLBank of Pittsburg. This programs gives up to $5,000.00 in grant money (“loans” that DO NOT have to be paid back). The particulars of the program are:
- A matching 3-1 contribution to closing costs meaning that for every dollar you have for closing they give you three dollars (ex. $1,000 by you equates to $3,000 given by FHLBank of Pittsburg totally NOW $4,000 dollars for closing from your $1,000, up to $5,000 given). THIS IS HUGE.
- Must be considered a 1st time home buyer (or no home in last 3 years or newly single)
- Have an income at or below 80% of the median income in the area of the house (move up time)
- Working at least 30 hours a week
- Complete four (4) hours of home counseling (they help identify and set up the classes)
- Stay in the home for at least five (5) years.
There are also other programs out there that offer grants and assistance like:
- Mt. Airy USA has grants as well as seminars and home buyer counseling
- OHCD: Philadelphia Office of Housing and Community Development with many other resources
- PNHS: Philadelphia Neighborhood Housing Services: provides counseling and grants as well
3. Mortgage Loan Assistance and favorable rates: Like I said in the opening, there are MANY banks and lenders offering more favorable loans to buyers. THIS TIME, they seem better regulated and more stable than those that helped cause the housing issues in the past. Check out this list of programs and companies and know there any MANY< MANY other. Reach out to me for more:
- Home Partners: Renter to Ownership Program
- NACA: Neighborhood Assistance Corporation of America
- Philadelphia Urban League Housing Department: Workshop on grants, incentives and housing assistance on June 18th, 2016
- CitiBank HomeRun Program: Low interest rates as well as low down payments
4: Philly is HOT: I am sure you noticed how areas once seemed “undesirable” are not HOT and trending and in the process of being “reborn”. Revitalization has hit Philadelphia BIG and that means big things for home owners. Home owners will continue to see improvement in the value of their newly purchased home. Philly gets an A+ in affordability compared to other big urban cities like LA and NY with a 78% affordability on a recent index.
Not much more to say except thing of the barriers or reasons you have decided NOT to purchase a home. Is it your credit? Is it your lifestyle and hesitancy to “own”? Is it money needed to purchase? Is it fear?. Regardless of the reason, think about owning this summer. The time is right.
Interseting look from the past to NOW