First Time Home Buying Simplified Episode 1
Hi everyone, I’m Scott DiGregorio, your mortgage guy. For this episode, I want to talk specifically to all the First Time Home Buyers out there. My goodness! There’s so much information here. The first point to make, possibly the most important is purchasing a home versus renting a home. As your mortgage guy, I’m not going to be the one to tell you to buy a home, not everybody is in that stage of their life!
While I think it is important for some people to buy a home, other people should be focusing on renting for now. It’s important to research and analyze all of your options, you know, look at the math of it all. Come up with a few solutions before making a sure decision. As a mortgage guy, I prepare a proper buy versus rent analysis for people.
I mean, there are a lot more details with this that I will get into in a few moments. But here’s what I want you to know, there are several buckets full of water and you have to look at these buckets full and instead of water, they’re full of either benefits or losses, right?
So on the positive side of things, there is a difference in payment between rent and a mortgage. But you’ve got to keep in mind that many first time home buyers should be getting a fixed-rate mortgage. This is where rent typically goes up 2% to 3% or 5% a year, and this percentage of rent goes up depending on where you are. However, this is just the first thing to note!
So with the cash flow difference in mind, right? Now, you’ve gotta think that maybe you’re going to be in this house for 5 or 10 years, right? So over the course of 5 or 10 years factoring rent increases, you’re now looking at a different cash flow amount. So with this change in mind, what are you looking at for the cash flow difference?
In addition to that, over the course of 5 or 10 years, how much is that home going to appreciate or go up in value? So that’s the second bucket, the appreciation bucket right? So if cash flow is the first, appreciation is the second.
The third bucket on the positive side is the amortization bucket. And what that means is this: how much have you paid down on your mortgage over those 5 or 10 years. So we have the benefits of cash flow potential, the benefits of appreciation, and the benefits of amortization. Just as a reminder, these three things are on the positive side of things.
On the flip side of the coin, I don’t like saying it’s the negative side so rather than saying that, well say on the expense side of things. A good way to describe this is when you’re talking about selling or buying a home. When you sell your house you’re going to have real estate commissions. When you buy the house you are going to have closing costs.
With the new tax plan that’s effective as of 2018, for most people in America you’re not going to have any tax benefits.
So to do it properly, you really have to weigh the pros and the cons for your specific situation and their difference. There’s a lot of information here, don’t feel bad if it goes over your head the first time you think through this stuff. And look, I’m happy to run a buy versus rent analysis for you on your situation. Just reach out to me and I could put that together. That way, all you have to worry about is going over the numbers I’ve put together for you. Because again, you have to look at both the pros and cons. Don’t let that scare you though, just thinking about life you’ll notice there are always pros and cons to every situation.
I hope this gets you walking down the right path. If there’s anything else you need, reach out to me: 239-910-6040.
Watch the video here: https://www.floridamortgageexpert.com/firsttimehomebuyer-series