Rates, tactics, programs make a difference in affordability
Given today’s interest rate environment and current home values, now is a wonderful time to buy your first home. While rates have increased slightly from their previous lows, one must look at the history of where rates have been. There was a time when rates were in the double-digits, nearing 20%, making home buying difficult to afford. But rates are cyclical in nature and go up and down over time. With current interest rates in the 3% to 4% range, home ownership is often cheaper than rent.
In addition, the home buyer will realize a tax benefit that they will not see by continuing to pay rent. Furthermore, home values in many areas are beginning to increase. Buying a home is the biggest investment in one’s life, and buying now allows you to see appreciation in that investment.
Incentives, special programs give first-time home buying a boost
There are numerous home buying incentives, depending on where a buyer is looking to purchase. In Maryland, for example, a first-time homebuyer is entitled to 0.25% off their state transfer taxes. This means that on a $400,000 home, that transfer tax would equal $1,000— that a first-time home buyer would not need to pay. In addition, most jurisdictions have down payment assistance programs, allowing a first-time homebuyer to purchase with little to no money down.
There are also numerous bond and grant programs that provide this assistance, subject to availability of funds. At Embrace Home Loans, we have a 4% loan to offset money needed for a down payment. But keep in mind, while a homebuyer can purchase with little to no money down, the more one finances, the higher the payment.
Should I buy a condo or townhome?
Often, first-time homebuyers consider the purchase a condo as a starter home since condos in many markets are less expensive than a townhome or single family home. I will always urge a potential borrower to consider the total payment vs. the purchase price alone, as condo payments include a condo fee. Condo fees are typically much higher than a homeowners association fee for a townhome or single family home. Therefore, while the price of a condo may be cheaper, the total payment may be higher. Buying a more expensive townhome may result in a lower total payment, allowing a potential buyer to afford more.
Buying fixer-upper as first home purchase
Frequently, a buyer is looking to purchase in a particular area but finds that the inventory of homes is low in that area, and all that is available is something that needs some work. There are solutions for making a home that is in need of some tender loving care your dream home. We accomplish that through a renovation loan. This type of financing enables the borrower to purchase the home and finance the cost of improvements all through one loan.
Therefore, while you may find a deal on a home that is in need of repair or upgrades, it is possible to purchase it without needing to put in the cash to renovate. Think outside the box to see the possibilities for creating the home you want from a home that may be a fixer-upper.
Author credit: Sondra Shemer
Photo credit: Brandi Ibrao
About the publisher.
About the Author
Sondra Shemer is a Production Sales Manager with Embrace Home Loans. She is a 33-year veteran in the business and is skilled at working with first-time homebuyers. Walking them through the process, Shemer addresses their needs and makes sure they are informed and educated throughout. For more information, please contact Sondra at firstname.lastname@example.org.