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If You Can Easily Afford to Buy A Home, Do You?

Monday, September 4, 2017 - Article by: Chris - 1st Nationwide Mortgage - Message

1. How Long Will You Be in the Area?If you're uncertain how many years you'll be in the area and even if you can afford a mortgage (and the associated taxes and fees that come with it), it's still may take 5 years or longer until you'll come out ahead with regards to buying vs. renting.

2. How Old Are You?If you're young, just beginning your career and was offered a job that is hundreds of miles away, a couple of states away, or on the opposite coast, buying so soon may not be a good move. The reason is because the repayment of a mortgage and its interest is allocated heavily at the beginning of the loan. Around 65-percent of each payment is applied towards interest and 35-percent is distributed to principal on a 30-year loan. Even with a 15-year loan, anticipate around 50-percent going to interest initially.

3. Are Closing Costs A Deal Killer?Renters say once your offer is accepted and the final week arrives before taking possession, you have thousands in closing costs to come up with on a loan. This is true that most buyers will have to pay closing costs.

However, there are two ways to make it significantly. The first is asking the seller to give you a credit of 3-6-percent of the sales price towards closing cost credit. The second way is to ask your lender for a slightly higher rate that covers the lender fees and most of the closing costs.

For example, on a loan below the maximum loan limit for FHA and Fannie Mae loans is $636,150 in Orange County, California . A credit of 1-2 percent of the loan amount, $6,361 - $13,720, is substantial when it comes to paying for closing costs.

As a final point, it's definitely feasible that home values will decline once you decide to make a purchase. If all the financial gurus could accurately estimate a home's value in 2 ,5 or 10 years from now, everyone would be rich. It is recommended that you review a long-term chart and trends for the area you want to buy a property.

Having said that, most areas in the country that have gone through a downturn have seen prices rebound back to their peak prices around 10 years later. Some happen earlier because of high demand and some take longer.

Did you know on the past 30 years, housing market has increased four-times are much as inflation. Long term real estate appreciation has outpaced inflation by a comfortable margin.

Sure, there risks in any investments, even if it is your home. However, when you can make your housing payment fixed for 15 to 30 years, you won't be one of those people complaining about rents increasing annually or every few years. That is what L.A. Long Beach, and Orange County residents are doing.

Some people are missing the point that rent is a GUARANTEED loss. Becoming a homeowner is POSSIBLE loss, but if you buy in a high demand area, the value of the home should increase with the proper time. In fact, Orange County homes have increased.

Self-made millionaire David Bach claims that "the one huge mistake millennials are making is not prioritizing homeownership. It is an escalator to wealth."

"Orange County renters can easily spend half a million dollars or more on rent over the years ($1,800 per month for 30 years adds up to $648,000), When it is all said and done, you end up just where you began -- owning nothing.

Not a good deal for your kids. Or you can purchase a home and spend the same amount paying down a mortgage, and in the end up owning your own home with little to no monthly payment. At that time, when most people retire or work less, your home has minimal monthly debt, so your disposable income should still be sufficient.

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