Renting Versus Buying A Home

Think you can’t afford to own your own home? Think again. If you currently rent, chances are you can buy. We’d love your feedback on our why rent when you can own article! Please comment at the bottom.

The Federal Housing Finance Agency made changes in the summer of 2021 that mean on-time rent can count in underwriting for government sponsored loans underwritten by Fannie Mae. The change will help would-be homeowners who have a history of paying rent augment their credit.

Plus, many renters find that a monthly mortgage payment is similar to a rent payment, especially when interest rates remain historically low.

While some renters like the flexibility in the rental lifestyle, renters can be at a disadvantage financially. They can be subject to rent increases at any time, and they receive no tax benefits. And though they can move pretty much any time, they also could lose their rental any time.

However, by financing a home purchase with a fixed rate loan, your costs remain fairly stable, and you’ll likely be eligible for tax benefits that will result in savings. And those monthly payments? They don’t go to the landlord! They build equity in the home, which will probably be recouped (plus some) when the home is sold.

Additional advantages include:

  • You can maintain your property instead of relying on your landlord.
  • You can personalize your space through your décor and landscaping.
  • You have an increased sends of community, stability and security.
  • You’ll be more likely to make friends or join a local organization.

A major concern potential home buyers have is accumulating enough money for a down payment. While a 20% down payment is preferred, it can be difficult to save up, especially when you’re paying rent every month. But there are options!

USDA, VA and some HUD loan programs offer 0% or very low down payment options, and many loan programs allow home buyers to use gift money or even grant money for down payments.

Conventional loan programs will accept down payments as low as 3%. They’ll require the borrower to pay private mortgage insurance as part of their monthly payment. As home equity builds either through regular payments or through home value appreciation, the private mortgage insurance can be eliminated.

FHA loan programs can be accessed with a 3.5% down payment, requiring mortgage insurance for the length of the loan. This option may not sound as appealing, but FHA programs will often lend to borrowers with lower credit scores. Most borrowers who choose to stay in their homes will refinance to a conventional loan once they gain enough equity and improve their credit scores.

Simply put, owning a home is a great way to build wealth – something renting a home will not do. Reach out to a lender to start the process of transitioning from renting or owning. It may be easier than you think!

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