When I counsel a new or first time buyer here in Denver, or even a seasoned seller buying their next home I often hear "we just don't know" where, what kind of loan, how quickly, etc. There aren't answers for some questions until you get your feet wet and start looking but the financing is often the easiest. Here are some thoughts about turning your "we shoulda" into your "we did"!
Some would-be buyers have emotional reasons to own a home like having a place of their own where they can raise a family, feel safe and secure and enjoy their friends’ company. Other buyers’ dominant reasons might be financial in nature such as building equity or lowering their cost of housing.
Regardless of what might be motivating people to want their own home, it is easy to justify that now is a good time to purchase. Let’s look at a $250,000 example using a FHA loan.
The total payment will be about $1,835 dollars a month. If the payment is lower than the rent a person is paying, that should encourage a person to continue investigating.
In this example, when you consider the monthly principal reduction, the monthly appreciation and the tax savings, even with money added for monthly maintenance, the net cost of housing is less than half the total house payment.
Considering all those advantages, the would-be buyer is spending over $1,100 per month more to rent than it would be to own. In a year’s time, they would lose close to $14,000 which is more than the down payment of $8,750 required on this price home.
Most would-be buyers understand that a home is a big investment but they may not understand the advantage of the leverage caused by the low down payment mortgage. The benefits extend beyond a return on the down payment but to the value of the home.
In this example, the $8,750 down payment grows to an equity of $73,546 in seven years based on 2% annual appreciation and normal amortization on a 30-year loan. If you calculated that as a rate of return, you’d be challenged to find anything that could compare with it.
To see what your numbers might look like, check out this Rent vs. Own. If you need any help or have any questions, contact us. Part of our greatest satisfaction is helping would-be buyers understand why they should-be.
Most new home builders honor the Realtor Client relationship in Denver however, I would need to be with you on your first or second visit to the builder's site. Best advice I can give you is carry my card with you and present it to the builder representative and say "this is my Buyer's Agent". Do not sign or fill out any forms. If you find you want to buy something right now! call me and I will do my best to get there to make sure you are well covered. Those of you out of Denver it is a bit harder, but I might find a good Realtor to help you too. Best practice is to call me with your questions.
There are pages of resources at DenverRelocation.com for all buyers