Ok, as we prepare for the New Year and add losing 15 lbs, gym membership/ trainer, better job, taking relationships/ friendships more seriously and other pieces of the “moving my life forward” puzzle, many add Owning a Home to their “resolutions” as well. In my life and experience with home ownership I went from
- living at home
- paying what was left of a mortgage at home when my mother moved and “gave” me our childhood home
- looking for a home of my own and being scared away a bit due to not getting what I wanted for what I wanted so we (wife and I) purchased our first “investment property” to later use to purchase our home.
- Later finding our “Dream Home” after a few missed opportunities after placing offers (we purchased during the height of the boom when multiple full price offers was the norm.. ). *NOTE: so you know where my home value is now! LOL.
This being said, I never had the first hand experience of renting for any period. I often wanted to do a survey on renters and what would or does motivate them to finally buy. Is it totally up to them or are there other circumstances and situations at play that dictate this move. Well lucky for me, Yahoo did such a study, sort of.
In this post I will summarize and offer my views on this survey. Full disclosure dictates that I also give credit to Ms Tara-Nicholle Nelson and her article also summarizing this issue.
Reasons for Renting Yahoo! Home Horizons Survey 2012
Source: Yahoo! Real Estate Home Horizons 2012 survey — based on responses 496 buyers/renters in the market to purchase a home.
Ok, Lets break this down. In fairness I will attack this from the standpoint of my belief that everyone should endeavor to own and part of my job is to help facilitate that.
- DON’T HAVE MONEY FOR A DOWN PAYMENT 53%
- INSUFFICIENT CAPITAL/ INCOME 51%
- WON’T QUALIFY FOR A LOAN 38%
This is the top three reasons from the 415 respondents as the main factors for renting and not buying. I will approach the Down Payment and Income Responses with a Trulia chart.
Trulia Rent vs Buy Index
Ok, in Philly and the surrounding area, for that matter 95 plus % of the country it is cheaper to buy currently. You pay more renting than owning (unless buying in New York.)
As a landlord, I k now that a fully rented home or duplex makes me usually $200 more than the mortgage even before all the downturn.
Second as said by Ms Nelson in her article.
A full 30 percent of the owners and renters who self-identified as interested in buying a home expressed concerns that they might not be able to scrape up enough cash for a down payment.
As an agent my past 2 property closings have cost the client :
- $1000 +$500 deposits
- $700 home inspection
- about $1200 at closing
for a home in the 130k range. How you might ask? Well…. because as an agent for a buyer, I always suggest Sellers Assist as well as exploring FHA mortgage options.
Sellers Assist is when a buyer requests assistance from the “seller” to be used for closing. This can be $0 to in some cases up to 6% of the price of the house. Keeping in mind that with a FHA mortgage TOTAL closing costs average around 6.5%-7% of the cost of the house. Hopefully you can see how Seller Assist can greatly reduce a buyer’s “contribution” at closing.
Now for the third point. I have to honestly admit that currently THIS is or could be an issue. Mortgage lenders have become more stringent with loan approval. However, with the right mortgage broker or lender it is definitely possible. More than possible, it is probably. I have seen approvals with a credit score of 630. Contact a broker they can and will also help you understand and guide you into what to do to improve your credit score.
Some other insightful findings.
Cost of Owning a Home
I will give more on this later.. more on the survey and what it means