Why buy a home in the New River Valley

Ok, we all watch the news and hear that our economy is not in the best of shape. Real Estate transactions are down, no one can credit to buy, the stock market is tanking blah, blah blah blah blah. Here is the thing, think about it like a sale. No one wants to buy something at full price. Of course, we would all like to buy things at the bare bottom price. But think about this. Rates are at 30 year lows. Today, a person can borrower money at 4.750% to buy a home. Home prices, while we in the New River Valley have been insulated to a degree, are at very attractive prices. Better than those prices per square foot that we were looking at three years ago. Yes, there is an expense to buy a house. Yes, you do pay alot of interest over the life of the loan. However, you OWN it. You also may receive a TAX DEDUCTION from your mortgage interest that you pay the bank. If you have private mortgage insurance as part of your loan, that to is Tax DEDUCTIBLE from your taxable income presently. Oh, and the biggy......you may qualify for a tax credit of up to $8,000.00 if you purchase before November 30, 2009. Can we say CHA-CHING?

Look folks, let's do a little basic math. Lets say you are a school teacher making $38,000.00 a year. You currently pay $1,000.00 a month in rent to the landlord who owns your house (and has a mortgage, and oh, by the way, is not paying the mortgage because YOU are). Anyway, that is another story. So, you have saved up $2,000.00 for a down payment on a new car. Your current car is ok, and only costing you $200.00 a month. You have another credit card that runs you around $50.00 a month. So, let's get to calculating.

USDA has a loan program that offers people 100% financing with no down payment and the seller can pay most if not all of the buyers closing costs. Hold off on buying that car for a moment.

You earn $38,000.00 a year. That equals around $3,166.66 per month. You have a car loan of $200.00 per month plus the credit card of $50.00 a month, and shoot, we'll throw in another incidental revolving debt around $100.00 per month. So, all told, your installment and revolving debts are about $350.00 a month.

We use up to 43% of your income to cover all of your debts, to include your new housing expense. Housing expense consists of principal repayment of the loan (P), interest payment on the loan (I), real estate taxes each month (T), and insurance collected each month (I)=PITI.

Your estimated new loan monthly payments on $150,000.00 would be around $782.47. This is the P and the I. Add taxes in the monthly amount of around $140.00 plus homeowners insurance in the amount of around $35.00 per month and you have a total housing expense of $957.47. Of course, this is based on a 30 year fixed rate loan with an interest rate of 4.750%/APR 5.148%.

You get the same payment and you own the house. You can paint the walls, mow the grass, add a room, whatever you want to do because it is yours. Oh, and the little discussed thing about making money. Here in the New River Valley, the appreciation of property over the past 5 years has been around 8.00%. The appreciation within the last 12 months has been around 2.00%. Not the declining market that you hear so much about in the media. If you plan on living in the area for 5 years or more, it absolutely makes sense to buy.

Why are you paying rent again?

Note: Dave Shelor is a Private Mortgage Banker with Prosperity Mortgage Company, a joint venture with Long and Foster Real Estate and Wells Fargo Home Mortgage, NA. There are multiple loan programs available for all types of situations. This program may not be the perfect fit for you, but another program may suit better. All representations made in this blog are for informational purposes only. You may or may not qualify for the loan scenario discussed here. To determine the loan program that you are best qualified for, please contact Dave directly. Prosperity Mortgage is an Equal Housing Lender.