When discussing renting versus buying, it’s helpful to have tools to calculate the differences. Luckily, our friends at JVM Lending have hooked us up. Here is our edited version of their information:
Imagine having a borrower who is paying $1,800 in rent who is very nervous about his or her potential payment increase after purchasing a home. These calculators can show how their “effective payment” will go down when tax savings and appreciation are accounted for.
Now, Trulia and Freddie Mac both offer great “rent vs. buy” calculators that will help with this. Even with modest appreciation (like 3%) and tax rate (28-34%) assumptions, these calculators can clearly show how much better off people are when they buy.
For example, according to our imaginary borrower, the Trulia calculator tells us her net housing costs will actually be 3% lower after she buys a $500,000 home with 20% down. These tools can help potential buyers get off the fence by showing why it’s a better investment to buy a home and accurately differentiate between buying and renting. I like to look at as you are paying yourself, not a landlord.
Did you know your credit score can affect your home purchase? In Keith Loria’s BHG story recently, he discussed this idea.
As he points out, “having a good credit score can be the difference between obtaining the mortgage you need to buy your dream home—or settling for less because you didn’t qualify for the money you need.”
This is important as many buyers don’t consider their credit score until they’re already involved in the process. At that point, it’s usually too late to fix anything that might be wrong with your score. So think ahead and monitor your credit score!
Don’t like your credit score? Paying off debts is the fastest way to up your score, but if you are in the process of applying for a loan, check with the lender first. Missing deadlines on your credit payments are huge hits to your credit score!
I also spoke with my local lender, Jay Vorhees of JVM Lending, about this, and he gave me a few benefits to having a high credit score :
Borrowers with higher credit scores usually get lower interest rates (especially when loan-to-value ratios are higher)
Borrowers are allowed to make smaller down payments, if necessary
Underwriting requirements become less onerous because there are fewer conditions and requirements
Second mortgage financing is easier to obtain, if necessary
If you have any questions about credit scores, purchasing a home, or the market in general, please feel free to reach out. I’m happy to help or guide you to the right person!