Once upon a time it was actually cheaper to rent an apartment or condo than it was to buy a home, but that is not always the case anymore. It all depends on your location, but there are some areas where the monthly mortgage payment for an average-priced home is less money than the average monthly rent on a three-bedroom property.
The price of rent has gone up substantially over the years, while the cost of buying went down, partially after the market plummeted in 2008. While home prices came down and were more affordable, construction also went down, meaning fewer new apartments to meet demand, which was already high before the recession.
The result? Rent payments can be just as much or even surpass mortgage payments for a similarly sized home. According to a recent report from New Hampshire Housing, the median monthly rent for a two-bedroom apart is at over $1,200.
In fact, recent economic studies across the US found that due to the sharp rise in rental prices, buying now makes more sense in about two-thirds of the nation’s counties. This is in part because of the historically low interest rates borrowers have been taking advantage of for the last few years. Though rates have slowly inched up in recent months, they are still at historic lows, making it an excellent time to buy.
Does this mean you should consider home ownership? The best way to find out if owning a home might be cheaper than your monthly rent is to speak to a mortgage lender and see just how your finances fit into their loan requirements and products.
Will You Qualify?
You won’t know if you don’t ask. Often, buyers think they will not qualify, or that owning is far more costly than renting, but sometimes they learn that they actually could spend the same or less per month if they bought a home – and that they do qualify for a mortgage.
What about that big down payment you haven’t saved for? Do not worry about whether you have a sizable down payment to place on a home. There are programs to accommodate buyers that lack the 20 percent down payment you hear so much about.
According to a recent survey, 70 percent of potential home buyers do not know about down payment assistance programs available to them. Though Fannie Mae and Freddie Mac are offering a much-publicized deal of only 3% down payment required for a mortgage (versus their previous 5 percent), you might be surprised that there are even better deals out there. In fact, there are more than 2,000 down payment assistance programs nationwide that can drastically reduce the amount of money buyers need to pay at closing.
Owning a home can come with its challenges, but it is an investment and can cost the same or less than a monthly rent payment in some cases. Now is the perfect time to learn more about buying, and considering putting that rent money into home ownership instead. The first step is to talk to your mortgage broker, who will be able to find out how much home you qualify for and if it fits your budget.
To learn more about getting pre-approved for a mortgage read our article on how to get a mortgage.