Thinking of buying a home, but not sure you can?

It’s become harder and harder for many people who haven’t owned a home in the past few years to buy one now.  Throughout Colorado, as in most places across the country, housing prices have soared, leaving many persons and families out in the cold.  Rents, too, have soared—causing many households to spend 45% to 50% of their after-tax incomes on rent, making it difficult to save enough money for a downpayment to buy a home.

Before the “Great Recession” (which began in 2008), home prices and homeownership moved roughly in tandem; however, now there are statistics galore showing the cost of housing has far outstripped personal and household income growth since 2008. This is reflected in the fact that homeownership in the United States is now at the lowest percentage since 19681—that’s 48 years ago—showing just how far we’ve fallen behind.

There Are Ways to Get the Help You Need

It’s unfortunate, but most people who would like to own a home of their own (and not just their first one) are not aware there are now loan programs—both government and lender—that can either do away with the need for a downpayment or reduce it to between 1% and 3%, which needn’t come from the homebuyer. These options make it possible for more and more people to purchase:

  • Government loans (FHA/VA/USDA) that give the homebuyer 4½% of the home purchase price for the downpayment/closing costs.THE BEST PART IS THE MONEY IS A GRANT, NOT TO BE PAID BACK.
  • Conventional loan programs where the homebuyer puts 1% down and the lender kicks in 2%, giving the homebuyer 3% down; or the homebuyer simply puts 3% down. Either way, the money from the homebuyer does not have to be his/her own; it can be gifts from various sources, and the homebuyer pays no mortgage insurance.

Why Buying a Home May Be Better For You Than Renting

There are the personal/emotional feelings most people experience with “a place of your own”:

  • The ability to decorate, refurbish, or remodel as you’d like.
  • Eliminating the impermanence of renting with the possibly of having to confront the sale of the property, not having your lease renewed, raising your rent, or simply not liking your landlord and moving.
  • Financial factors and risks such as lack of tax advantages—the money is just gone.

When you own and have a mortgage, the interest you pay each year on your loan and your property taxes are used as deductions on your income tax, thereby saving money. Each monthly payment you make reduces the amount of your mortgage, thereby increasing your equity in your home.  (Equity is the difference between the property’s value and what is owed on the property.)

Since 1975, through all the ups and downs in the residential real estate market, the average appreciation has been 4% to 5% per year, depending on the data source used.  Meaning, in addition to the tax savings and increasing equity with each payment, using the historical data, equity is also added each year because of appreciation in home prices. In the past two or three years, the much higher than average price appreciation has been greater than the increase in most people’s income, creating the affordability problem we have today.
So now you know, today it is possible to buy a home of your own even if you have just a little savings, or have none at all.  Having a downpayment saved up need not be a roadblock any longer to owning a home.  If you like the idea, check out the details.

1 U.S. Department of Commerce.