It’s fascinating to see studies about how the pandemic could impact the future residential real estate market. The latest Mortgage Blog post noted that many city dwellers are now considering a move to the suburbs. Here’s another impact: A recent renters survey showed that 35.9% of all renters say they likely will not renew their lease, while another 38% are not sure or are somewhat likely to renew their lease. Most striking is that 41.6% of renters who pay $1,750 or more per month say they will likely not renew their lease. The article states that apartment fitness centers, pools, and clubhouses closed due to the pandemic contributed to this renter sentiment.
As someone who likes growing my net worth, I must say this survey makes sense to me. At today’s historically low interest rates, it is possible for someone in the Atlanta area to buy a $300,000 home with a 5% down payment, and have a mortgage payment of only about $1,750 per month. (This assumes a 3.5% interest rate.) With a monthly rent payment, the entire amount is an expense. Renters do not build wealth from their residence. But a home buyer begins building her net worth with her first mortgage payment. For the scenario mentioned here, the very first mortgage payment includes $448.53 of principal, or equity in the home. So only $1,302 is an expense. That seems like a better use of money to me.
And, given recent home price appreciation, it is reasonable to assume that an owner’s home will appreciate over time, building additional wealth. So home owners build wealth with appreciation over time and with each payment. My question is, “Why would someone pay $1,750 in monthly rent when they could own a $300,000 home instead?” I suppose I can understand if people love their apartment’s amenities or if they don’t want to deal with home maintenance issues.
But many people believe myths that make them think they cannot buy, when they actually can. One myth is that a buyer must make a 20% down payment. I have closed many mortgages where the home buyer made only a 3% down payment. And I’ve closed VA loans where the borrower paid $0 down. To fund 3% down payment a buyer can get a gift from a relative or perhaps borrow from a 401K account. Another myth people believe is that they must have “great” credit. Even in the pandemic world, we can close mortgages for people with a 620 credit score. And there are ways to improve a credit score over time.
Would you like to grow your wealth every month with homeownership in Georgia instead of making an expense-only rent payment? If yes, contact me today. We can start planning now to help you buy a home as soon as possible.
