Do Not Get Caught in The Renters Trap

August 28th, 2014

In a recent press release, Zillow stated that the affordability of the nation’s rental inventory is currently much worse than affordability of the country’s home sale inventory. The release revealed two things:

• Nationally, renters signing a lease at the end of the second quarter paid 29.5% of their income to rent
• U.S. home buyers at the end of the second quarter could expect to pay 15.3% of their incomes to a mortgage on the typical home

Furthermore, renters pay more than the average of 24.9% that was paid in the pre-bubble period while buyers
actually pay far less than the 22.1% share homeowners devoted to mortgages in the pre-bubble days.

Don’t Become Trapped

If you are currently renting you could get caught up in a cycle where increasing rents continue to make it impossible for you to save for a necessary down payment. Zillow Chief Economist Dr. Stan Humphries explains:

"The affordability of for-sale homes remains strong, which is encouraging for those buyers that can save for a down
payment and capitalize on low mortgage interest rates… As rents keep rising, along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult for millions of current renters.”

Know Your Options

Perhaps you already have saved enough to buy your first home. HousingWire recently reported that analysts at Nomura believe:

“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment.

It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.”

Freddie Mac came out with comments on this exact issue:

• A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
• Freddie Mac's purchase of mortgages with down payments under 10 percent more than quadrupled between 2009 and 2013.
• More than one in five borrowers who took out conforming, conventional mortgages in 2014 put down 10 percent or less.

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible to get a mortgage.

 Source: www.KeepingCurrentMatters.com