07 Nov Buying vs. Renting-Let’s Talk Options!
Incredible scenery, well-paying jobs, mild climate—these are just some of the reasons people are moving to the Puget Sound. Population growth and a low housing supply is driving market costs up. Many people in and around Seattle believe that becoming a homeowner is out of reach for them and renting is their only option. Let’s debunk this myth today!
Renting Might Not Be Cheaper
A lot of people in the Seattle area —about 41% — are renters. Some choose to not own a home due to personal preference. Others are overwhelmed by Seattle’s hot housing market. Homes in the area can be expensive and those on the market move quickly. But mortgage rates are currently at a record low. And rent generally increases each year. Now is the time to give buying a home a second look.
A Realistic Down Payment
One roadblock to potential buyers is the idea of a down payment. It’s commonly thought that a savvy homebuyer will have a 20 percent down payment. While this is a great goal, it’s unattainable to many. The average home sale price in 2019 was $633,700, meaning 20 percent equals $126,740. That is no small amount of money! But there are different paths to home ownership, many that don’t require a large down payment. Here are some options:
Financing Option 1: FHA Loan
A Federal Housing Administrative, or FHA, loan is popular with first-time home buyers, but not limited to only this group. Anyone can apply for an FHA loan and it is a great option for people without perfect credit or a large down payment. Depending on which qualifications are met, this type of loan will allow someone to purchase a home with as little as 3.5 percent down. An FHA loan does require that the homeowner pay private mortgage insurance (PMI) to protect the lender. Also, the FHA requires a separate (and possibly more stringent) home appraisal, again to protect the lender’s investment
Financing Option 2: VA Loan
A VA loan is partially backed by the Department of Veterans affairs and is a terrific option for those that qualify. Active duty service members, veterans, current and former members of the National Guard and reserves, and surviving spouses can take advantage of this loan. It allows homeowners to purchase a home with little to no down payment, avoid paying PMI, and receive lower interest rates.
Financing Option 3: Conventional Loan
A conventional loan is simply a loan that is not tied to a government program. When a homebuyer utilizes a conventional loan and has a 20 percent down payment, paying PMI can be avoided. However, most lenders will offer a conventional loan with the PMI rolled into monthly payments, to buyers who have a small down payment, sometimes as little as 3 percent.
Hopefully, you are starting to see you have options when it comes to financing and owning your own home is possible! We offer a free First Time Homebuyers Class to help you fully understand the home buying process. I am excited to start walking down this path to home ownership with you!