Mortgage Rates are Low - What on Earth Does that Mean if You Would Like to Buy Instead of Rent. You see it on the news, you see it in the paper, you see it on the internet...mortgage rates are low. In fact, they are lower than they have been in recent years. Today's average mortgage rate for a conventional fixed 30 year mortgage is just 4.4%.
But what does this mean? I think most people who would like to buy instead of rent are confused about how to translate this rate into actual dollars and cents saved over the long term. Below, I've tried to give the simplest guide I can to explain what these low mortgage rates mean, and how if you are renting, you can leverage these low rates to save money both now and over the long term.
For this example, I will use one of my Single Family Home listings in Parkville: 8109 Conduit Road. Currently, this 3 Bedroom 1 Bath Renovated Home is listed for $210,000. Veterans have zero down financing options available, but most buyers would need to select an FHA loan, which requires a 3.5% Buyer contribution to get into the home.
To get down payment funds, you could access your savings, potentially borrow from your 401(K) as long as you have discussed it with your lender, or receive gifts from family members to get to the 3.5%.
A common misconception is that you have to have your 3.5% down payment plus closing costs. With an FHA loan, you have to have 3.5% of the negotiated sales price in the deal, and the Seller can contribute up to 6% toward your closing costs, which should cover the rest needed. For our example, the estimated funds to close amount is $13,929. Of this amount, you would have to have $7,350 of your own funds to qualify for an FHA mortgage for this home, and the Seller could contribute to the rest.
As far as the payment goes, your payment on an FHA 30 year fixed loan at a final negotiated sales price of $210,000 would be $1,380. This includes your mortgage principle, interest, tax and insurance.
Looking at what's currently available for rent in the area, 3 and 4 bedroom townhomes are running at approximately $1300 - $1500. If you would like to buy instead of rent, for the same monthly rent payment of a Parkville townhome, you could have the advantage of owning your own single family home, along with all of the tax advantages and equity benefits that come along with homeownership.
If you would like to buy instead of rent, and have any questions about the financial benefits of owning a home that I've discussed here, or about anything that I've discussed here, please don't hesitate to contact me. I love working with first time buyers and guiding them through the process.
*These figures are approximate, and based on today's mortgage rates only. Your lender can give you exact figures once you have completed and submitted a loan application.
Clients always ask me: Are you on the web?
See for yourself.
Tim McIntyre, GRI, Ellicott City Realtor, Catonsville Realtor
Helping Clients Buy, Sell and Invest in
Howard County, Carroll County and Baltimore County
for more than 25 years.
tmcintyre@cbmove.com 410-480-3555
www.timsellshomes.com
