Meridian, Idaho Homes: Renting vs. Buying

Should you rent or buy?

It’s a frequent question from people who are looking at Meridian, Idaho homes.

The answer often involves more than just money.

Buying is a longer-term commitment that includes both financial commitments and more responsibilities than renting.

If there’s a possibility that you’ll be moving within a couple of years, you’re almost certainly better off renting than buying.

Renting provides more flexibility, doesn’t require a down payment or buyer closing costs, and your landlord takes care of the property.

But, the landlord also dictates how you must live in his home.

If you’re reasonably sure you will not be moving within a couple of years, you should consider buying a home.

Buying a home allows you to build equity as you pay down your mortgage instead of paying off your landlord’s mortgage.

And, you’ll have the freedom to live as you wish without a landlord or property manager dictating what you must do with his home while you are paying for it.

There are also many financial considerations.

Here’s a comparison of renting vs. buying, using a $200,000 home as an example:

Renting

  • $1,250 – $1,300/month rent
  • One-year lease (likely)
  • Security deposit (varies)
  • First and last month’s rent (varies)
  • Pet deposit (varies)

Buying

  • $200,000 purchase price
  • $20,000 down payment
  • $180,000 loan – 30 year, fixed-rate, 4.25% interest rate
  • $1,050 estimate payment (principal, interest, taxes, and insurance)

Things To Consider

  • Depending upon the buyer’s eligibility, there are loan programs available with as little as zero down payment, or low down payments.
  • Some sellers will pay buyer’s closing costs; thereby reducing the amount of money needed to purchase.
  • Homeowners are also often able to deduct certain costs of home ownership on their tax returns.

Would you like some help analyzing buying vs. renting for our own specific situation?

I would be happy to meet with you and help you figure out what’s best for you with no obligation or sales talk.

Give me a call at (208)938-5533 to schedule your own private consultation.

 

Home Loans: What Not To Do

Buyers who are in the midst of getting home loans often don’t understand how precarious their position is while they’re in escrow.

One of my recent transactions illustrates how critically-important it is for buyers to be aware of what they can and cannot do when they’re buying a home.

My young buyers were anxious to achieve the American Dream and own their first home.

We found the right home, got their offer accepted, and thought we were on our way to a smooth closing.

As the closing date approached, the lender did their last-minute credit check, along with re-verifying employment status, and confirming adequate funds to close.

That’s when I got the call from the lender, asking me if I knew my buyers had bought and financed a new vehicle a few days earlier.

So, I called my buyers and learned all about their beautiful new $70,000 Yukon Denali XL with the Mocha Steel Metallic paint, 6.2 liter V-8 with 403 horsepower, nav system, 8,000 lb. towing package, third-row seats, rear DVD system, and special financing with no payments until it’s worn out.

They bought a beautiful new rig, but the lender didn’t share their excitement.

We were unable to close because the new Yukon payment resulted in the buyer exceeding the debt:income ratio required for their new mortgage.

If you’re buying a home, it’s critically important that you do not take on any additional debt during escrow after loan approval.

Lenders are required to complete last-minute confirmations of every last detail of your financial stats before they fund your loan.

Now you know!

 

Boise Home Buyer Closing Costs

I get a lot of questions from Boise home buyers about their closing costs.

Those questions are valid, but nearly impossible to answer precisely.

Here are a few things that can be included in a buyer’s closing costs.

Loan Costs

Lenders usually charge all sorts of fees, including an origination fee that’s often 1% of the loan amount, plus assorted other fees.

Your lender is required by federal law to provide you with a Truth In Lending Disclosure detailing all of your financing costs.

Impound Account

Impound accounts are also sometimes called escrow accounts.

An impound account is an account established with your lender to accumulate adequate funds to pay your property taxes and homeowner’s insurance when they come due.

Buyers must provide a portion of those funds to establish their impound account as part of their closing costs.

Appraisal Cost

When a buyer is financing their home purchase the lender, the lender will require an appraisal.

The appraisal is ordered by the lender from a blind pool of appraisers (through an Appraisal Management Company) to prevent any outside influence on the appraisal.

The purpose of the appraisal is to justify the value for the loan amount; not to determine market value.

In the Boise real estate market, the seller often pays for the appraisal.

The cost for a single-family appraisal is usually around $400 to $450, but can be more for non-owner occupied properties.

Escrow Fee

Title companies charge a flat fee for processing the escrow of a home purchase.

This fee is regulated by the Idaho Insurance Commissioner, so it’s generally comparable from company to company.

A typical escrow fee is usually around $700 and is split 50/50 by buyer and seller.

Homeowner’s Insurance

Buyers pay for the first year’s homeowner insurance premium at closing.

The cost can be obtained from the buyer’s insurance agent and varies according to coverages.

Title Insurance

There are several types of title insurance, but there are two that are most common.

One is the Owner’s Title Policy that insures the buyer for clear title.

The other one is the Lender’s Title Policy that insures the lender for clear title.

The Seller usually pays for the Owner’s Title Policy and the Buyer usually pays for the Lender’s Title Policy.

My Handy Rule of Thumb

As a general rule of thumb, a buyer’s closing costs are often around 3% of the purchase price of the property.

Takeaway

The biggest variable is financing, so be sure to discuss your financing costs with your lender and make sure you understand them.