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. As an Example, let’s take look at a $250,000 home using an FHA loan to purchase the property with you as the buyer.
Your total payment will be about $1,835 dollars a month. If the payment is lower than the rent you are currently paying, that should encourage you to continue investigating.
In this example, when you consider your monthly principal reduction, the monthly appreciation and your income tax savings, & even some money added in for your monthly maintenance, the net cost of your housing is less than half the total house payment. That drops right to your bottom line by the end of the tax year.
Considering all those advantages, you are probably spending over $1,100 per month more to rent than it would be to own. In a year’s time, they you lose close to $14,000 which is more than the down payment of $8,750 required on this price home using an FHA Loan.
I know you think that a home is a big investment (I was there once too!) but they you 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 a conservative 2% annual appreciation (Las Vegas is current at 6%) & 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. Not even your 401K! The Calculation that I just explained is reflected in the graphic below!
As I mentioned earlier in this post, my husband & I have been in the Rent vs Own Dilemma before! We purchased our very first home in South Minneapolis with $1500.00 down. Our PITI (Principal, Interest, Taxes & Insurance) was $256.56 per month on our 30 Year FHA Loan. Before buying, were were paying nearly $400.00 per month for rent. You think that was easy? We were only making $9500.00 per year.. Just as stressful then, as it is now!
I would like to help you purchase that first home! Talk to a tax professional to see what impact these numbers would have on you & give me a call to get pre-qualified & I'll start sending you homes to look at. If you don't currently work with a tax professional, I have several reputable firms that I can put you in touch with in the Las Vegas Valley.