Buy a Columbia SC Home Versus Renting One
It’s cheaper to buy a Columbia SC home than renting it. This stat holds true in most U.S. housing markets, according to the real estate site Trulia.
The reasons: Columbia SC home prices are still falling and mortgage rates have remained at or near historic lows for months – while rents are on the rise.
Trulia looked at asking prices for rentals and homes for sale, while also factoring other costs such as taxes, insurance and maintenance.
Buying a Columbia SC home is much more affordable compared to renting in some areas with low vacancy rates where rents have increased in recent years.
Your income, savings, and monthly expenses play an important role in determining how large a mortgage you can afford.
In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit for homeowners, the savings can be significant.
Monthly Expenses When You Buy a Columbia SC Home
Your rental company takes part of your rent payment to cover certain housing expenses. When you decide to buy a Columbia SC home, you accept responsibility for paying for these expenses (listed below). They are additional costs to your monthly mortgage payment and should be included in your budget estimates:
- Property Taxes and Special Assessments
- Home/Hazard Insurance
- Utilities
- Maintenance
- Home Owner Association (HOA) Fee: Doesn’t apply to all purchases. It pays for trash and snow removal and maintenance of common grounds if applicable.
- Membership Fee: It may pay for recreational facilities and other services (cable TV).
Although there are many things to consider when deciding which is cheaper for you, to buy a Columbia SC home, or to rent one, we hope this article has helped you in the planning stages.
Home buyers, whether first time or not, face many challenges before closing on the home of their dreams.
Getting a mortgage can be a challenge in and of itself these days. Then you need to find the right real estate agent to assist you, looking at perhaps dozens and dozens of homes looking for that perfect fit. All this while trying to stay within a budget.
Just because you think you can afford mortgage payments doesn’t necessarily mean you can afford the home. There’s more to it than that.
Homeowner’s insurance, taxes, homeowners association dues, maintenance, and higher electric and water bills are some of the costs first-time homebuyers tend to overlook. Keep in mind, property taxes and insurance have a tendency of going up every year.
Home buying doesn’t begin with home searching. It begins with a mortgage pre-qualification. Get pre-approved, THEN find a home. This way you’ll make a financial decision versus an emotional one.
Spending all or most of your savings on a down payment and closing costs is one of the biggest mistakes first-time homebuyers make. Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance, but they are left with no savings at all.
If you have to use every dime you have in savings in order to scrape up enough cash (20%) to avoid paying mortgage insurance, you’d be better off not living on the edge and pay the mortgage insurance premium until you have enough equity in the home to have the insurance dropped.
So you’ve found the perfect property and gotten pre-qualified for the mortgage. The contract is signed, and you close in 30 days. Don’t go out and start buying furniture for the house and run up credit bills in the process. There’s a good chance the Lender will pull your credit report again before closing to make sure your financial situation hasn’t changed since the loan was approved.
Buying a home can be a rewarding time in your life, but it can also be a stressful time, so make sure you take these things into consideration before you even start the process.
How much home can I afford? This is the question every person thinking of buying a home should ask. Or better yet, how much home can I easily pay for?
Before you even start looking at homes on the Internet, or thinking about going to see a real estate agent, you should take a hard look at your finances. If you’re barely able to make your rent payment each month, buying a home may not be your best option.
Yes, sometimes a mortgage can be cheaper than rent, but don’t forget, as a homeowner, you’re also responsible for taxes, homeowners insurance, repairs, and sometimes association fees. So figure out how much you can pay, then how much you can “easily” pay.
Debt To Income Ratios
Lenders use ratios to determine what you can afford to pay for a home. To follow their example, figure out your debt to income ratio yourself. It’s a handy number to have whether you obtain a mortgage or not.
Front End Ratio
This will be shown as a percentage of your gross monthly income. This number reflects what the lender believes you can afford as a loan payment based on your gross monthly income.
Back End Ratio
This number is your new mortgage payment plus all recurring debt. For example, if you pay $300 per month on your car and you pay $150 per month on a credit card, the total of $450 plus your new mortgage payment makes up the back end ratio.
Most lenders want you to keep your debt to income ratio between 34 and 38 percent. Meaning, your total monthly debt should not exceed 34 to 38 percent of your monthly income.
Expect to pay anywhere from 2 to 3 percent of the sales price for closing costs. So for example a $150,000 home will run you closing costs of about $4500 in addition to your down payment.
Loan programs can vary greatly between lenders, so it’s helpful to enlist the aid of a mortgage broker when shopping for a mortgage because they know the requirements and guidelines of many different lenders. They can shorten your shopping time and potentially save you from getting a loan with less than desirable terms.
Different lenders will have different underwriting criteria to determine the risk they are willing to undertake by providing you with a mortgage. Part of that criteria is the down payment. Programs range from no money down, a/k/a “100% financing”, to 20% down or more, and a number of factors will determine which ones (if any) you will qualify for.
Determine Your Price Range
Now that you know how much of a mortgage you can likely be approved for, you can work backwards to determine what sales price range you need to focus your search efforts on.
Experts recommend that once you’ve determined how much you believe you can afford to pay, set aside the difference between what you’re paying now and what you would be paying as a homeowner, factoring in a set amount for any unforseen home repairs. Think of it as a “dry run” to see how well you do.
Interest rates will change how much your mortgage payment will be, and those rates change often – daily, and sometimes even hourly.
If things are too tight, consider eliminating debts and/or opting for a smaller home. Many individuals have started small and worked their way “up the ladder” of home ownership, buying successively larger homes until settling upon the one they want to live out their remaining years in.
Nothing stays the same forever – things happen, jobs are lost, people get sick, houses catch fire, whatever, so it’s a wise home buyer who plans for such contingencies, allowing plenty of breathing space between what they can afford and what they can easily pay for.
If you need help determining what that amount is, feel free to contact us for a no-obligation consultation, or find a reputable mortgage broker to help.
When buying a home, there are a lot of things to look at to ensure you make the right decision. It is a significant investment on your part as a buyer, so one of the things you need to be aware of is the cost involved in buying the home.
You’ll need to consider the down payment. While just a fraction of the selling price, it will still be a significant amount. Your lender will set the down payment they require, depending on the type of loan you’re seeking.
If you’re financing more than 80 percent of the value of the property, you may need to pay for private mortgage insurance. This is required by lenders as a form of protecting the property. If you do not want this extra cost, you can opt to put down a higher down payment which is usually 20 percent of the selling price to avoid PMI. Aside from saving money on private mortgage insurance, you can also request a better interest rate if you put down more cash up front.
You’ll also need to consider loan fees. This is labeled by different names by different lenders but it will usually be a form of payment for the processing of your loan. Be prepared for this as it will always be a part of what you will be paying once you take out a loan with a lender like a bank or any financial institution.
The lender may also require you to have the property inspected before you buy it. Of course, you would need to pay the person or firm that would do the inspection. You should also add other things like the money you would use when going around looking for a property or visiting your real estate agent.
Setting your budget is one of the first things you need to do when buying a house, so use these tips as a guideline for getting started.