Rent Stress. It’s real.
There is always a big push at the beginning of the year to focus on resolutions like healthy eating, exercising and mindfulness. Most of our resolutions center around reducing stress. There are hundreds, if not thousands, of articles and studies focused on how we can reduce stress. One of the biggest causes of stress that is often overlooked is the worry related to paying rent. If you do not own your home, more than likely, you pay rent and have a lease agreement that you sign every 6 months or yearly. Do you know how much your rent will increase the next time you sign your lease? If your rent increases too much will you have to move? Do you have a family to consider when choosing a new place to rent, children in school?
In a recent report by ATTOM Data Solutions’ titled 2018 Rental Affordability Report, the average fair market rent rose faster than average weekly wages in 60% of the counties analyzed in the report (266 of 447 counties). What we know is that rents will continue to rise, and mortgage interest rates are still at historic lows. This means that as a renter you will continue to pay your property owner’s mortgage allowing them to gain wealth or you can purchase your first home and build your own personal wealth. As a homeowner, your mortgage payment is a form of ‘forced savings’, which allows you to build equity in your home. You will also have all the other added benefits of being a homeowner, which include housing stability, better health, and an increase in freedom. 15.7% of income is all it takes to be able to afford a median home in the US as of Q4 2017.
If you need help, schedule a counseling session with your counselor. They can help you get back on track, work on your savings or your credit and setup new action steps and a timeline so you can reach your goal of buying a home in 2018!
Down payment | Myth vs Fact
As you prepare to become a homeowner I am sure most of you will want to start saving or have already started saving for your down payment. While most experts will recommend you save around 20% for your down payment that may not always be true.
The latest data, October 2016 through November 2017, from the National Association of Realtors show that 61% first-time homebuyers purchased their homes with down payments below 6%. There are a couple of reasons behind this number. First, Fannie Mae and Freddie Mac both accept down payments as low as 3%.
First, Fannie Mae allows all the down payment for one-unit principal residence property mortgages with loan-to-value of greater than 80 percent (or down payment of 19 percent or less) to come from eligible givers (persons related by blood or marriage, fiancé, fiancée, or domestic partner. And, Freddie Mac allows gifts/grants after the borrower puts in a three percent down payment.
Also, the Federal Housing Administration allows the 3.5 percent down payment to come from acceptable donors (relatives, employer, friend, charitable organization, government agency) for borrowers with credit score of at least 620. However, if credit score is between 580 and 619, the down payment must be the borrower’s own money (required minimum investment). The builder, seller, or an associated entity to the transaction may not provide gifts.
Programs like these can allow you to enter the housing market sooner than you may have thought. Remember, each loan product has its own set of guidelines and the information above may be a lot to digest. It’s always best to speak to your counselor if you have any questions.
There are also numerous down payment assistance programs available. TSACH, SETH and Harris County are just a few of the programs available for you to look into. With rent continuing to rise now is the best time for you to start looking for your dream home.