Study Proves Buying Home Cheaper Than Rent!
If crunching the numbers it’s likely you will discover what the study proved. That is, buying a home is cheaper than rent. This applies to starter homes in Santa Clarita or San Fernando Valleys and other average income areas.
First off, this post was originally published back in 2011, but the information still applies today. We have edited & updated this post on numerous occasions, but the content remains relevant and well worth sharing.
A Common Misconception
Over the years we’ve had the pleasure to represent many first time home buyers. One common misconception is, many automatically presume it will cost them more money to own a home than renting a home. In Santa Clarita at least, this is simply not true. To clarify this we’ve talked with multiple lenders and all say the same thing. When considering everything, including tax benefits, buying a home is cheaper that rent. At least as it applies for starter homes.
It’s a Two Fold Problem for Renters
The difficulty for renters is usually two fold. They lack money for the down payment and some have credit issues. Yes, if there are credit problems it will take some time and a good plan of action to correct. However, if you feel you don’t have enough cash on hand for a down, be SURE to VERIFY how much you really need.
By the time you read this, the amounts shown below will be outdated, however you can still do the math to determine current actual costs. As an alternative, contact us directly for help.
How Much to Buy a First Home?
Keep in mind, a decent condo can still be bought in SCV for under $500K. If obtaining a FHA loan, the down payment amount is 3%, but be prepared for 3.5%. The math says, 3.5% of $500K is $17,500. Right now, as of 2022 first time buyers can still find suitable condos for $400K! Sure, that’s a lot of money but 3.5% of $400K is $14,000. Assuming a fixed mortgage loan of $385,000 at 3.5% the monthly mortgage payment is $1,728.82 per month, plus taxes, property insurance, mortgage insurance and monthly HOA dues. Of course, after adding it all up that amount may be somewhere in the $2,500 per month range, but what are you paying for rent? Also, don’t forget add the the home buying tax benefits into the equation. All things considered, the math tells us buying a home is cheaper than rent. Then, what about 5 years after buying? How much equity have you earned? It’s hard to know what that amount will be, but if renting there will be ZERO equity and history tells us, real estate has always been a solid long term investment.
Of course, the above numbers will change daily, but when considering EVERYTHING it’s easy to see the advantages of buying a starter home as opposed to renting.
Contact Local REALTORS
Matt & Meray Gregory
[email protected]
Matt & Meray Gregory are the REALTORS®, Brokers & have helped many buy their first homes. Schedule a consultation to get started.
Your Local REALTORS®
DRE# 01463326
DRE# 01831112
More Information Especially for First Timers
Regardless of what you feel your financial status is, it’s still a good idea to see what’s involved in buying a home. Even if you think your credit or income level may come up short, it’s still worth it to find out more. We’ll schedule a meeting with our preferred lender to see where you stand. Even if you are sure you won’t qualify, meet with our lender anyway. If you don’t have the income or credit needed to obtain a home loan now, we’ll help you establish some home buying goals. This is the KEY and we can help! It’s critical to learn exactly what is needed to get in a home and set goals!
Check out our first time home buyer’s guide, filled with extensive information especially for those with a desire to buy a first home.
There MAY also be some public and private grant opportunities. The grants are not always available but still worth checking. We already mentioned using FHA financing. If planning to buy a condo you’ll want the locations of condo complexes pre approved for FHA loans. Contact us and we can schedule a meeting to determine if we can help.