If you need someplace to live in Phoenix or Scottsdale, AZ, you might want to consider buying a home over renting. Last Friday, the Arizona Republic reported "It's much tougher to find an affordable rental in Phoenix now than a year ago," said Mike Orr, director of the Center for Real Estate Theory at W. P. Carey School.
"Most of the rentals available now are priced above what the typical household can afford." They went on to report, "The average rent for a Phoenix-area house or condo is up 5.7 percent from a year ago, according to Arizona State University's W.P. Carey School of Business. The typical apartment rent is up more than 5 percent, research from RealFacts shows."
For the past few years, would-be renters considering all factors when deciding to rent or buy, have seen that buying has been the more economical choice given the fact that it's usually about the same or in some cases, less expensive to pay a mortgage with today's interest rates. Owning a home, if you can come up with the down payment, which many banks have lowered to as little as 3% of the purchase price, depending on your FICO scores, income and outstanding debt.
In my last blog, Buy vs. Rent- MATH Still Makes a Case to BUY, I discussed the Cromford Report's (also headed by Mike Orr, quoted above) argument that after 5 years, even at only 4% annual appreciation, most buyers would be up nearly $60K in equity by choosing to buy over renting.
How do you know if you're a good candidate to buy? Here are a few indications:
- You have money for a down payment. A minimum of 3% of the price of the home you want to buy is a good place to start, depending on what you want to buy. Some banks have programs that might require counseling to get this rate, but it's incredibly low. 3.5% is the minimum for an FHA loan, in which homes have to meet a certain criteria to be eligible to qualify. 5% is typically the minimum for a conventional loan (below $417K).
- You have a FICO score at or above 600. I'm not talking about your credit score from freecreditkarma.com, I said your FICO score, the one that a lender or some other institution that issues loans sees. If anyone pulls your credit, you're owed a copy of it, particularly if they deny you for what you applied for! Some lenders will work with borrowers who have lower FICO scores but you may pay a higher interest rate.
- You can commit to living in the home or are comfortable with the option of renting out your home if you are unable to for at least 5 years.
- You have a regular income that is documented with paystubs, W2s and tax returns that are all current.
- You aren't saddled with more debt than you can manage to repay in this lifetime. Don't get me wrong, most people have debt, but I'm talking about lots of maxed out credit cards and an endless loop of collections who call you daily.
If most of these apply to you, call/text or email me for the name of a few good lenders to talk to immediately. I know several great lenders who are patient and will see if you might qualify for a home loan.
If you are a little concerned that you might not quite meet all of these, call me. I'm not qualified to say whether you are, but since I work with buyers AND lenders regularly, I know what it takes to be a good borrower and have helped several buyers make the leap from renting to buying!