Rent vs. Buy: Know when to hold 'em, know when to fold 'em

If you are a renter, chances are you’ve contemplated buying at one point or another. What’s stopping you? In today’s market, we know it’s easy to get cold feet about buying. Here’s how to navigate some of the most common self-placed roadblocks we hear from renters who are hesitating to make the leap to first-time homebuyer. Grab our hand and on 1...2...3… JUMP! 

I’ll overpay if I buy now

Homes in the Philadelphia area have a historical average of an annual 6% appreciation. If you are waiting to buy because you feel you will be overpaying in today’s market, keep appreciation in mind. Sometimes paying over ask in today’s market could actually be the smart move. For example, if you go $10k over the asking price, it breaks down only about an extra $50 bucks in your monthly mortgage payment. The appreciation of your new home will make that $10k up quicker than a dollar bill blowing down Passyunk Avenue. 

When interest rates are higher, the buyer pool is less competitive, because there are simply LESS buyers looking. If you’re able to buy now you can look to refinancing once the rates go down without having to compete with more buyers for the same home.

My credit score is bad. There is no way I will be approved for a mortgage.

If your credit score is good enough to rent, it’s most likely good enough to buy. To qualify for an FHA loan, which allows you to put down 3.5% you will need a credit score of 580. It is true that a higher score helps you get a better interest rate, but it’s not the only factor when considering a mortgage.

Talking with a lender will help you figure out what your monthly mortgage payment will be within the rate at which you qualify. You may find a mortgage payment is cheaper than your current rent, even with a less-than-perfect credit score. If the lender advises you it’s necessary to increase your credit, they’ll hook you up with a repair consultant they trust. Increasing your credit score dramatically and quickly may be as easy as a phone call. We’re happy to connect you with one of our recommended, local lending partners so you are getting top-notch service.

I don’t want to use up my savings for a down payment

In addition to low down payment mortgages which only require 3-3.5% down, home incentives such as the Neighborhood Opportunity Program combined with seller assistance can bring your required down payment down as low as 1%. Although home buying grants are more challenging to achieve, they also available to help you avoid bottoming out your savings.

You may also be able to tap into a sellers assist to help cover the closing costs. A seller's assist is a financial concession, in the form of a credit, provided by the seller to the buyer in a home sale transaction. In simpler terms, the seller gives part of the property’s sale price back to the buyer at closing. The buyer can use it to cover closing costs which can include: an interest rate buy down called “points”, transfer tax, title insurance, hazard insurance, property taxes, notary stamp, recording fees, and appraisal, to name a few. 

Stack that bank account by eliminating one or two things from your weekly spending. Hop on your bike or walk to meet for happy hour ($20) vs. taking a Lyft and going to dinner ($75). Put away $20 bucks a week in your sock drawer. Between those simple changes, you’ll be halfway to a down payment by the end of the year! 

We want to get to know which neighborhood to call our own before buying

With rapidly rising home values, 2 years in a new home may be all you need to sell at a profit. Probably about as long as you planned to rent right? Our neighborhood pages and neighborhood tours can help you get quickly acclimated to the right location that suits you best.

Moving from NYC, California, or somewhere else out of town? Take a weekend, book yourself a room at Lokal Hotel, and read up on our suggestions for walking tours that will get your out and exploring all that Philly has to offer! During your visit, pop into any open houses that catch your eye. Or our agents can offer you tours of homes and areas that suit your needs and budget.

My lease is expiring and I am not feeling ready to buy just yet

Talk to your landlord about negotiating an early exit from your lease or a month-to-month option. You’d be surprised at how often the request is accommodated. The average closing is about 45 days, if you are using a homebuying loan program it may be even longer. Fold those stats into your timeline to help gauge when it is the right time to end your lease. 

It really is easier to buy than you think. If you want advice on where to start, we’re here for you. Join one of our monthly homebuyer workshops. Better yet, let’s grab a coffee and chat about your fears and more importantly your hopes of becoming a homeowner. We can do this together!