Tired of Renting? The Benefits of an FHA Mortgage
A lot of people run these numbers to see what they are missing out on as a homeowner. But not everyone has the same financial needs or wants, and it’s important to take your raw data and calculate it with those in mind.
One way to get closer to a decision is to use a rent vs. buy calculator or to run your own numbers using the same information you would plug into one.
To get started, you need a home price--something typical for the size and type of home you want that can be found in the local area.
Use this price to help calculate a mortgage payment (using principal, interest, property taxes and any applicable homeowners association fees) and compare it to how much you pay in rent, renter’s insurance, and other expenses associated with renting.
When gathering your information, there are a few variables to consider. If you need to choose whether to rent a home, buy one with an FHA mortgage, or purchase with a different loan program, you’ll have some numbers that will flex depending on circumstances, location, and other concerns.
And borrower choices also factor in; do you want to finance your closing costs or pay them in cash? Financing the costs where permitted will raise the total loan amount and your monthly payments.
Some borrowers choose to offset this with a higher down payment. Others might need to save more money up front and out-of-pocket and for these borrowers paying more down might not be an option.
Another area to pay attention to when considering these calculations?
How interest rates may factor in (will they be higher or lower when you commit to the home loan if that's what you decide?), plus other issues such as homeowners insurance and monthly costs including utilities. No, utilities aren't included in your mortgage payment but when deciding whether to rent or own you may need to factor in the utilities issue.
Why? Because not all rental situations charge for all utilities. Water and trash pickup might be covered under your rental agreement but when you own your own home those costs are yours to bear and worth considering alongside the more directly mortgage-related expenses such as property taxes and mortgage interest.
In some cases, you might need to get some advice from an experienced professional--an FHA loan officer can help you find a realistic amount to consider for mortgage costs in your area, advice on what the going interest rate offer might be, and other variables. There’s no obligation to talk to a loan officer when you are in the planning stages of your loan and the information you get can help you arrive at a more realistic estimation of the costs of renting versus owning a home.
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