Let's Talk Money!

Recently, I've had the pleasure of serving a lot of buyers in the real estate market. With rates and prices where they're at, what may seem like a "no-brainer" to me may not always be the case with the public. It's always a priority for me to guide buyers off of the proverbial fence and onto the "other side," where the grass really is greener.

When real estate professionals talk about the benefits of homeownership, there are typically two sides: emotional and fiscal. The emotional benefits of owning a home include the ostensible "pride in homeownership," having a place for your family, a place to call home, a place to see the results of your work, place where you make the rules. In any market, these are benefits that are going to accompany homeownership.

On the other hand, it may be harder to argue the fiscal benefits, in past markets, of purchasing a home. Let's take a look at what the numbers come out to in historical reference to our current market.

Average rates for a 30-year fixed mortgage:

• 1992: 8.25%
• 2002: 6.5%
• November 2011: 4%

A low rate, like our current 4% means that you will pay a monthly payment radically lower than in the past, resulting in dramatic decreases in overall paid interest during the lifetime of the loan.

1992:

• Mortgage price:     $150,000
• Interest rate:     8.25%
• Monthly payment:   $1126.90 (P.I.)
• Total paid over loan:   $408,683.83

2002:

• Mortgage price:     $150,000
• Interest rate:     6.5%
• Monthly payment:     $948.11
• Total paid over loan:     $341,311.10

Current:

• Mortgage price:     $150,000
• Interest rate:     4%
• Monthly payment:     $716.13
• Total paid over loan:     $257,801.84

If we compare interest rates alone over the past 20 years, you are saving a total of $150,881.99 on the same price since 1992, and $83,509.26 from just a decade ago!

You can own a home for the payment of $716.13/month plus tax and insurance, or rent a similar home for up to $1,500/month!

My professional suggestion:

Sit down with a financial advisor. Take a good, hard look at your 5 year plan. Make sure that real estate is a part of it. Adjust your goals accordingly to incorporate a new home for yourself, or an investment property to capitalize on the market. Examine your credit report. If your credit score is above 550, sit down with a qualified loan officer, and get pre-approved. And remember, the best thing you can do is call a professional to find you a new home.

Cheers!