Renting vs. Buying | Here’s What You Should Know
Last Updated on March 29, 2022 by Luke Feldbrugge
It’s a hard market for first-time home buyers: home prices are up, inventory is low and mortgage rates are getting more expensive. But depending on which market you are looking for housing, buying may still come out a winner on affordability compared to renting.
Rent inflation has made that option prohibitively more expensive. Some markets have seen rents rise by up to 30 percent and, in some cases, may still make the cost of home buying for first-time buyers look like the more affordable option in 26 of the 50 largest metros, according to Realtor.com.
For example, the median monthly rent in Birmingham, Alabama, for a rental with up to two bedrooms was $1,201; the monthly cost of buying a “starter” home was $668 in January. Realtor.com calculated the monthly cost of buying based on a 7 percent down payment, with a mortgage rate of 3.45 percent, and included taxes, insurance, and HOA fees.
According to Freddie Mac, mortgage rates have since crept up above 4.55 percent for the first time since May 2019. Even with rates trending higher, buying may still come out as the more affordable market in some housing markets.
Of course, affordability is likely the main driver behind choosing between renting and buying. One common misconception that keeps people from opting to buy is the size of down payment. The National Association of Realtors said that many buyers believe they need more than a 15 percent downpayment. In reality, the typical down payment for first-time buyers has ranged between six to seven percent since 2018 for first-time home buyers.
The bottom line is that if you are considering buying a home, you need to know your financing options. Know that there are several first-time home buyer mortgage options that allow for smaller down payments compared to conventional loans. That type of upfront saving can make the option to buy a home more affordable. Luckily, there are also several programs with down payment assistance. Heroes across the country in healthcare, law enforcement, education, firefighting, EMS, and military professions can take advantage of these down payment assistance programs in each state, AND save an average of $2,400 when they close on a home using their local Homes for Heroes real estate and mortgage specialists. Simply sign up today and learn how Homes for Heroes specialists can help you get into the home you want and save you significant money in the process.
Also keep in mind homebuyer education courses are often required for down payment assistance. They can help borrowers make sound decisions about financing, buying a home, and sustaining homeownership.
If you are gearing up for a home purchase this spring buying season, here’s a Homes for Heroes house hunting checklist to help you determine the absolute must-haves for your new home.
