Monday, April 13, 2009

What can I get for...

This UnReal Deal isn't about a particular property.  Rather, it's about what you can get for your money.  I was playing around with some numbers the other day, and in doing so found that I'd illustrated to myself some of the reasons it makes sense to consider buying now.

What got me thinking was a conversation with the renter of one of the homes I'm selling, who is looking for a new rental home.  They're not prepared to buy right now, but it got my gears turning.

Let's say that they are paying around $750.00 for the house they are renting now.  That house should sell for around $65,000.  So by renting, they get a $65,000 house for $750 a month.  A house something like this.

I checked rates with both SRC Mortgage and Honor State Bank and found that 30 year RD (Rural Development) rates are around 4.75%.  This is a 100% loan product (requires seller contribution to buyers closing costs.)

Based on those rates, $750.00 a month would get you $143,775 in mortgage.  Now, I don't advise anyone spend all that they can afford, and you've got to figure in ownership costs like insurance and taxes, so let's back that down to $600 a month.  That gets you $115,020 in mortgage purchasing power.  Something more like this

So in this example, our hypothetical renter could buy, thereby investing in their own home (not their landlords), take advantage of mortgage interest deduction on their tax return, build equity, get an $8000 tax credit (if they haven't owned a home in the last 3 year), and live in a lot more house!

Let's look at this another way... imagine the buyer who qualified three years ago, based on a monthly payment of $500.  Back then, interest rates were around 6.5%, giving them $79,105 in purchasing power.  Now, at 4.75%, that same $500 would get them $95,850 in purchasing power!

Now put those numbers to work and make them real- search out some listings on my website and see how much house that buys you.  I think you'll be suprised, maybe even amazed.

If I haven't lulled you to sleep, and you want information specific to your situation, you can contact me using one of the tools in the sidebar, or leave a message below.

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