Many think renting is cheaper than owning. If something breaks down and needs fixed, it’s the property owners responsibility. But, is it really cheaper than owning the home? Let’s find out.
Surprise! Paying A Mortgage Is Cheaper Than Renting In 42 States!
Many people believe that renting is less expensive than owning a house. But it turns out it’s actually cheaper to pay a monthly mortgage than rent in 42 states. Renting is a better bargain financially in just eight states plus the District of Columbia, according to the personal finance website GOBankingRates.com.
Check out a state-by-state comparison below. It’s fun to see which is cheaper in your state. It’s even more fun to learn some tips for reducing your home purchase costs.
One reason homeownership is competitive is because mortgage interest rates are still historically low, Kristen Bonner, the study’s lead researcher, says in a web report. The average U.S. 30-year fixed mortgage rate is 3.56%, according to another site, Bankrate.com.
A key roadblock to buying a home is the inability of many would-be buyers to afford the down payment, which is typically 20% of the purchase price.
IBD’S TAKE: An IBD report explains that 39% of renters, especially younger ones, can’t afford to purchase a home because they are struggling with debt.
If the size of a down payment is a stumbling block for you, you may be able to reduce the size of the down payment. Just remember, with a down payment of less than 5% of purchase price, you’ve typically got to take on mortgage insurance, which boosts the size of your monthly mortgage payments.
Mortgage insurance protects the lender, not you, in case you default.
In 2015, the median down payment was 10% for buyers of single-family homes and condominiums, according to the National Association of Realtors. The median price of those homes was $220,000. So the media down payment was $22,000.
As of June, the median sales price of single-family homes and condos was $231,000, according to RealtyTrac. A 20% down payment would be $46,200.
Your mortgage interest rate is another key factor is determining the size of your monthly mortgage payment. To get the lowest available rate in your area, you typically need a credit score higher than 660 to 700, according to valuepenquin.com. The standard version of the widely used FICO score peaks at 850, although scores above 800 are rare, Bankrate.com says.
So, where is it cheaper to own than to rent? Here are the 10 states with the biggest monthly savings from owning rather than renting:
- New York: $1,635 cheaper to own than rent.
- Massachusetts: $559.
- Illinois: $522.
- New Jersey: $472.
- Pennsylvania: $461.
- Florida: $398.
- Maine: $396.
- Ohio: $375.
- Alaska: $334.
- Rhode Island: $334.
That gap for New York is based on the fact that the monthly rent of a single-family home in the Empire State is $3,295, which is almost double the $1,660 cost of owning.
And where is it more economical to rent than buy? Here are locales with the largest monthly dollar amounts in savings for renters over owners:
- Hawaii: $515.
- Montana: $248.
- Utah: $242.
- Idaho: $204.
- D.C.: $144.
- Colorado: $137.
- Wyoming: $99.
- Delaware: $75.
- Oregon: $12.
The GOBankingRates.com data assume that owners make a 20% down payment, based on the median list price, and take a 30-year fixed-rate home loan. It includes property taxes and insurance.
Jackson is a city in the south central area of the U.S. state of Michigan, about 40 miles (64 km) west of Ann Arbor and 35 miles (56 km) south of Lansing. The city population is about 33,534. Founded in 1829, it was named after President Andrew Jackson. By the late 19th century, it had developed as a railroad hub and was known as the crossroads of Michigan.
Jackson, Michigan is a great place to buy or rent a home with so many fun places and activities to do. Moore Home Builders has compiled the best attractions to get you here for a visit or to make it your homestead.
Cascade Falls is located at 1400 S Brown St in Jackson. An illuminated, colorful, man-made waterfall amplified by fireworks stands out on summer nights in Jackson. The Cascades, within the boundaries of the Sparks Foundation County Park, is one of Jackson’s most spectacular attractions.
For more than 85 years, The Cascades has captivated locals and visitors from around the world. Jackson’s most famous landmark, under the management of the Jackson County Parks Department, promises to amaze and delight for generations to come. Family Fun Night is every Wednesday in the summer and you can expect live music and costumed characters, along with the Falls. Live music can also be enjoyed every summer Saturday in the Rotary Bandshell at Sparks Park (also known as Cascades Park).
The Falls were built in the early spring of the 1930s. Its first display to the public was on May 10, 1932. The Cascades Falls are 500 feet in length, a vertical height of 64 feet, and a total width of 60 feet. There are 6 fountains, 16 Falls (11 are illuminated), 1,230 Colored Electric Lights, and a 2,000 gallon per minute water pump that filters, chlorinates, and recycles water in a closed loop system. There are 126 steps along each side of the Falls. This walkways passes 3 main pools of water that are 30 feet by 90 feet.
Ella Sharp Museum & Park
Located at 3225 Fourth Street in Jackson, this is a must see place so add it to your bucket list!
The Ella Sharp Museum opened in 1965 in the 19th century home of Ella Merriman-Sharp. Ella willed her 530-acre property to the city of Jackson in 1912, with the understanding that a park and museum be developed for all to enjoy.
The Hadwin Center connects seven galleries, which feature changing exhibits of art and Jackson history, and hands-on children’s activities in the galleries. In addition to touring the elegantly furnished Victorian home, visitors to the Museum may visit a one-room schoolhouse, an authentic log cabin, and other historical buildings.
It also features an 18 hole golf course, mini golf, disc golf, wedding rentals, and much more.
Cell Block 7
Cell Block 7 is easily accessed by either US 127 or I-94. They are located at 3455 Cooper Street in Jackson, Michigan on the grounds of the operational State Prison of Southern Michigan.
Explore Michigan’s prison history with these semi-permanent and temporary exhibits on the history of the Michigan State Prison, the prisoners and guards.
Sandhill Crane Vineyards
Located at 4724 Walz Rd Jackson, Michigan this is a great place to wine and dine!
Family owned & operated. All Michigan fruit, made with love & care in our cellar. Award winning wines. Inviting atmosphere for all. Locally sourced, & homemade food.
Visit the Dahlem Center at 7117 S. Jackson Rd.
Dahlem’s annual Birds, Blooms, and Butterflies Festival will be held on August 11
Falling Waters Trail
Infamous Helmer Castle
This castle is located at 7300 South Draper Road.
Step into the castle and step back in time to a home modeled after a fifth-century castle built near Nuremberg, Germany. Crafted in the 1920s in Jackson, Michigan by eccentric concert violinist Max Helmer, the local Liberace of his day, the Castle’s fascination, history and folklore are legendary. Situated on a private 20-acre estate, with nearly a mile of scenic driveways through a beautiful hardwood forest, the legendary “Castle”, as it’s known in the state is located on the highest point in south central lower Michigan.
The Castle, constructed with over 500 tons of fieldstone and steel reinforcement include a dungeon below grade which is accessed through a trap door. The walls of the home are over three feet thick at the base with a lookout/sundeck on the top of the massive 7 story tower which is accessed by an iron spiral staircase. In total, the Castle has five bedrooms, three bathrooms and five fireplaces.
Are you thinking of buying a home or property soon?
We all want the dream of buying our own home. Jackson, Michigan is a great place to live. Moore Home Builders LLC is a great place to start to find a place so you can live your dream. There are many sites to see and historic places to visit.
There are do’s and don’t when it comes to buying your forever home. Most homes though, are just stepping stones until you can buy a bigger place or your job relocates you. Families grow so more space and bedrooms are needed. Follow these guidelines and your experience of buying a home or property will be a less stressful in the end.
Don’t Make Any Large Credit Purchase
Don’t go on a spending spree using credit if you are thinking about buying a home, or in the process of buying a new home. Your mortgage pre-approval is subject to a final evaluation of your financial situation.
Every $100 you pay per month on a credit payment could cost you about $10,000 in home eligibility. For example, a car payment of $300/month could mean that you qualify for $30,000 less in a mortgage.
Even if you have accumulated enough savings, you should consider not making any large purchases until after closing. The last thing you want is to know that you could have purchased a new home had you curbed the urge to spend.
Use a Buyer’s Agent
It’s important that you choose an experienced agent who is there for you. Your agent should be actively finding you potential homes, keeping you informed of the entire process, negotiating furiously on your behalf, and answering all of your questions with competence and speed.
First, find an agent who represents you and not the seller. This is beneficial during the negotiation process. If you are working with a buyer’s agent, he or she is required not to tell the seller of your top choice. In addition, he or she is also focused on getting you the lowest asking price.
Also, when you use a buyer’s agent, you will see more properties. Not only are they plugged into their Multiple Listing Service, but they are also actively finding homes that are listed as FSBO, or homes that sellers are thinking about listing.
Should You Buy A Foreclosure?
With the housing bubble burst and the subprime mortgage crisis, millions of homeowners found themselves unable to make their mortgage payments. Many found themselves owing more on the house than the home was worth. Many just walked away from their homes. As a result of these complicated issues, millions of homes were foreclosed.
While this isn’t the only reason for which homes are foreclosed, it has been a widespread one. With all the foreclosed properties, there has also been extensive interest in buying these properties at a bargain price.
It is true that foreclosed properties can be priced at a significant discount, but they are also a much riskier investment. Before making an offer on a foreclosed property, do your due diligence.
Things you must do before buying a foreclosure:
- Do a title search – make sure that when you purchase a foreclosure that you are the only person who has any ownership claim
- Check for liens – find out if there are any liens against the property because you will be responsible for paying them
- Check for a second mortgage – you don’t want to be surprised by an extra mortgage that you will need to pay
- Know how good of a “bargain” you’re getting – foreclosures are sold “as is” and in many cases you will not be able to do a proper inspection. You may end up paying thousands of dollars repairing the property before it is fit to be lived in.
It is also important to consider that there are different types of foreclosure properties and each type comes with its own advantages and disadvantages. The different types of foreclosure purchases are:
- Real Estate Owned (REO), also called “bank owned”
A pre-foreclosure is when you buy the home directly from the homeowner, before the bank officially forecloses. This type of purchase does not require as much capital as other foreclosures. Also, since you are purchasing straight from the homeowner, you will be able to gather all of the necessary information, such as inspection reports, title information, etc. that may not be available with other foreclosure properties. Once you take over the mortgage, you will be responsible for all future payments as well as any overdue back payments.
A foreclosure property will usually end up at an auction. Real estate auction practices vary by state but common practice is for the auction to be held on courthouse steps, in front of the foreclosed home, or at the county clerk’s office.
Real estate auctions offer the best chance for a great deal but also hold the greatest risk. Auction properties are sold as is, with no opportunity for potential buyers to perform inspections. When buying a home at auction, the buyer must pay cash, usually a cashier’s check. It is also possible that there may still be tenants living in the home. In such a case, you would be responsible for the often costly eviction process.
Once a foreclosure has gone to auction and failed to sell, it becomes a Real Estate Owned, or bank owned, property. Most homes do not sell at auction, most fail to even get any bids.
An REO property is the least likely of the foreclosure properties to represent a bargain, but it is also the least risky. The property can be fully inspected, any title issues can be found and dealt with, and the sale can be subject to a mortgage. REO properties also tend to be in better condition than other foreclosure properties.
Another thing to keep in mind when purchasing a foreclosure is that some states have a redemption period that allows the original owner to buy back the property by paying the remaining balance owed. You may be able to have this redemption period waived, so check the state laws on this topic before purchasing.
Still interested in buying a foreclosure property? If so, always do your research before purchasing!
Is Buying a Home Still a Smart Plan
With the burst of the housing bubble, credit crisis, and millions of foreclosures across the country, you may wonder if buying a home is such a good idea after all. However, it’s important to consider all of the facts. The important message to take away from these events is not that buying a home is a bad idea, but that you must be smart about buying your home.
The housing market, like every type of market, unavoidably has its ups and downs. That doesn’t mean buying a home is a bad investment. As a long-term investment, homeownership is still one of the best investments for individual households. Historically, real estate has consistently increased in value, despite shorter periods of depreciation due to local markets and/or national economic conditions. The data shows that homes generally appreciate about 5% per year.
Importance of Inspection
As a buyer, you are entitled to know exactly what you are getting. Don’t take anything for granted, not even what you see or what the seller or listing agent tell you. A professional home inspection is something you MUST do, whether you are buying an existing home or a new one. An inspection is an opportunity to have an expert look closely at the property you are considering purchasing and getting both an oral and written opinion as to its condition.
Beforehand, make sure the report will be done by a professional organization, such as a local trade organization or a national trade organization such as ASHI (American Society of Home Inspection). Not only should you never skip an inspection, but also you should be present with the inspector during the inspection. This gives you a chance to ask questions about the property and get answers that are not biased. In addition, the oral comments are typically more revealing and detailed than what you will find on the written report. Once the inspection is complete, review the inspection report carefully.
You have to demand an inspection when you present your offer. It must be written in as a contingency. If you do not approve the inspection report, then do not buy the home. Most real estate contracts automatically provide an inspection contingency.
Hot, Normal, and Cold Markets
This is an extremely competitive market and is advantageous to the seller. Sometimes, homes will sell as soon as they are listed or even before homes are listed. Typically, during a hot market, multiple offers will be made on each home and more often than not, homes will sell for more than the asking price. It is even more crucial to be prepared and to be ready as a buyer when the market is hot. It can be easy to get caught up in the bid for a home, but if you are prepared (pre-approved, solid in price range, realistic about your needs), it is easier to remain focused on your housing needs and price range.
In a normal market, there is a fairly large number of homes available and an average number of buyers. This market does not necessarily favor the buyer or the seller. A seller may not have as many offers on their home, but he or she may not be desperate to sell either. Again, it is the buyer’s responsibility to be prepared. During a normal market, the chances to negotiate are higher than in a hot market. As a buyer, you can expect to make offers at lower than the asking price and negotiate a price at least somewhat less than what the sellers are asking.
In a cold market, houses may be listed for more than a year and the prices of houses listed may drop considerably. This market is advantageous to the buyer. As a buyer, you have the time to make an offer that works to your best interest. It is not uncommon to low-ball and to find that sellers are accommodating to meet your needs. Keep in mind that even though this market is a great time for buyers, you do not want to lose your dream home by being unrealistic. Your goal is to get your dream home at the best possible price.
Getting a Legitimate Lender and Getting Pre-Approved
It used to be that buyers could go house shopping and when they have found their dream home, then they go to get pre-approved. However, in today’s market, that has proven to be one of the least effective methods in landing the dream home.
Most lenders can pre-qualify you for a mortgage over the phone. Based on general questions about your income, debt, assets, and credit history, lenders can estimate how much mortgage you qualify for. However, being pre-qualified and pre-approved are different things. Pre-approval means that you have applied for a mortgage; you have filled out the mortgage application, received your credit report, and verified your employment, assets, etc. When you are pre-approved, you know exactly what the maximum loan amount will be.
A pre-qualified letter is not verified and in essence, does not count for much if you are competing with other buyers who are pre-approved. When you are pre-approved, you and the seller know exactly how much house you can afford. It gives you credibility as an interested buyer and lets the seller know immediately that you will qualify for a loan to buy their property.
In addition to being pre-approved, it’s important to be pre-approved with a legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit unions, savings and loan associations, mortgage brokers, and online lenders.
Some lenders to avoid: those who lose a form or misplace a file, those who gather information from you in an unorganized manner, those who are not informed about interest rates, points or costs, and those who cannot provide you with the right information.
Finding the Right Seller
The best seller is one who is highly motivated. A highly motivated seller is more likely to sell at a price that is less than his or her house is actually worth. And it matters that you find out why. Learning the reason why can help you get the price you want and help the seller get what they want: a timely sale.
When given the opportunity to meet with sellers, ask them why they are selling. The reason could be anything, such as a job change to a new location or financial problems. If you can solve their problem, whether it is cash related or time related, do so. For example, if the sellers are highly motivated because they need to move quickly, give them a fast sale – and a lower price. If you can make an offer, even a low one, that gives them cash in a short time, they are more likely to accept.
There are also some sellers that you should avoid. Not every seller is as genuinely motivated as they make themselves to be. Some possible hints:
- they stall on having the home appraised or inspected
- they are unable to clear up liens against their property
- they do not own 100% of their property
- they push back the move-out date
- they do not have a replacement property or back up plan
It is impossible to find the perfect seller. But it is possible to find out which sellers are legit and which ones aren’t
Build a Plan of Action and Get Ready
Buying a home will probably rank as one of the biggest personal investments one can make. Being organized and in control will contribute significantly to getting the best home deal possible with the least amount of stress. It’s important to anticipate the steps required to successfully achieve your housing goal and to build a plan of action that gets you there.
Before you can build a plan of action, take the time to lay the groundwork for your decision-making process.
First, ask yourself how much you can afford to pay for a home. If you’re not sure on the price range, find a lender and get pre-approved. Pre-approval will let you know how much you can afford, allowing you to look for homes in your price range. Getting pre-approved also helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment. Once you are pre-approved, you avoid the frustration of finding homes that you think are perfect, but are not in your price range.
Second, ask yourself where you want to live and what the best location for you and/or your family is. Things to consider:
- convenience for all family members
- proximity to work, school
- crime rate of neighborhood
- local transportation
- types of homes in neighborhood, for example condos, town homes, co-ops, newly constructed homes etc.
Avoiding Financial Stress
By asking the right questions, and knowing exactly what your needs are, you can find the right loan for you. There are certain approaches that you can take while mortgage shopping that can cost or save you money.
It is still true that the better qualifications you have, the lower your interest rate will be. However, there are mortgages available for almost everyone; it’s the interest rates or the down payments that vary.
Before speaking with a lender, know what monthly dollar amount you feel comfortable committing to. Then when you discuss mortgage pre-approval with your lender, it is easier for you to determine the monthly amount and what value of home the monthly amount translates into. Do not put yourself in the position where you will be paying more each month than you intended simply because the dream home requires it.
Do your research on the types of mortgages available to you and find the one that best suits your needs. There are a number of considerations to be made in terms of finding the best mortgage for each individual:
- What type of market are you in? Are the interest rates falling or rising?
- Do you want a fixed mortgage rate, where you will always know what your payment is going to be?
- What are your long-term goals? Do you intend to resell the property? Do you only need the mortgage for a short time?
Buying rental property can be a lucrative adventure. Becoming a landlord can be a great opportunity, but the best investors always do their due diligence before taking the plunge.
Although it is possible to make money in real estate, there’s more to it than purchasing the first decent house you see. Remember, TV shows about flipping houses and investing in real estate depict a reality that’s far from what truly occurs in real life. If you’re interested in buying a rental property, make sure to consider these factors first.
Condition Of The House
There’s nothing wrong with buying a fixer-upper, but you need to be realistic about the time and money it’ll take to make an ugly duckling shine again.
After receiving a thorough inspection by a qualified professional, ask yourself how many of the repairs you can do on your own, and how many would require outside contractors. Get estimates for any major jobs that you would have to pay someone else to do.
You’ll want to make sure that you fix all serious issues before anyone moves in, as an unsafe house can lead to grave consequences if tenants become hurt or sick.
Calculate how long the repairs should take. If the house needs to be vacant for months while renovations take place, it may not be worth it. After all, there’s nothing more discouraging to landlords than an empty house that isn’t bringing in any income.
The 1% Rule
Every investor has their own goals when it comes to returns, but most will agree that the income from an investment property needs to abide by the 1% rule.
For example, if you buy a house for $100,000, it would need to bring in $1,000 a month. This amount is determined by a simple math equation: taking the estimated monthly rent and dividing it by the price of the house ($1,000/$100,000 = 1%).
You should only consider buying a house that doesn’t meet the 1% rule if the property is in a neighborhood that is rapidly changing and improving, with home values and rents estimated to jump significantly over a short amount of time.
You should always consider property taxes when buying an investment property. High taxes will eat into your profits, while low taxes will allow you to keep a larger amount of your rental income each month.
As a general rule, expect to find higher property taxes in metropolitan areas, and lower taxes in more rural places.
Some locations charge investors at a higher rate than owner-occupants, so it’s worth calling your local tax assessor to determine whether this is the case.
Be sure to remember that even if you find the perfect house in the perfect neighborhood, high property taxes could make it a poor investment choice.
Just like property taxes, insurance costs can eat into your profits, so be sure to do your due diligence when buying rental property.
The first step is to decide what kind of coverage you want for the investment property. Do you want to pay a smaller premium each month but be faced with a higher deductible when you make a claim? Do you want to provide coverage for tenants’ personal property?
Secondly, you should determine whether the area you’re interested in has higher insurance premiums due to its vulnerability to floods, sinkholes, tornadoes, hurricanes, earthquakes or other natural disasters. If this is the case, the house may not be worth it.
Once you’re ready to proceed, start comparing insurance rates. Many companies offer an online calculator, but calling a customer service number can often allow you to create a more customized policy based on your needs.
The location of a house is just as important as the house itself. You need to choose an area wisely, making sure it’s a place where tenants will want to live.
The most important factor to consider is safety, making sure the neighborhood’s crime rates are not too high. Curb appeal is also a major factor, as tenants will be more eager to live on a street with well-manicured lawns and nicely painted homes.
If you’re hoping to rent to families, you’ll also want to have a look at the local school district. Parents are more likely to choose areas that have well-ranked schools.
Buying rental property near a university can be an excellent way to enter a strong rental market, although many investors are wary of renting to partying college students.
Being a landlord can be a headache at times, so you should consider whether you’re willing to deal with 3 a.m. phone calls when there’s a plumbing disaster.
Many investors choose to hire a property management company to take care of everything for them. Most companies charge around 10% of the monthly rent, as well as a fee for procuring tenants. Some also charge to supervise maintenance repairs from outside vendors.
Some landlords believe the management fee is well worth it, while others choose to save money and deal with problems on their own. This decision is purely a personal one, but one you should carefully consider.
While the primary objective of buying rental property is to make money, you should prepare for unexpected expenses. Things do break down…eventually.
Calculate the amount of money it would take to replace major parts of the house, including the roof, HVAC system and water heater. Throw in a sizable amount of extra cash as a cushion. Always keep that amount of money available, whether on a credit card or in a savings account.
Buying Rental Property
When buying rental property you have a lot to consider. Buy low and sell high is the goal or fix it up and find a renter. Many homes and buildings that are foreclosed on may have damage but most is so fixable. When buying rental property you can check for quick sales at your local courthouse and on the internet but be leery of some. You will want to check out and property before you buying rental property!