Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.misc From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Only gamblers will wait for 'better' market, rates Date: Fri, 13 Nov 92 15:11:15 EST Message-ID: \SE H;FRIDAY HOME GUIDE;FOR FIRST-TIME BUYERS \HD Only gamblers will wait for 'better' market, rates \BY Ryz Obuchowicz \CR SPECIAL TO THE WASHINGTON TIMES While now may be the right time to buy a home, many renters are afraid to do it because of fear of the unknown. Let's look at some of the common excuses that renters use to avoid taking the plunge into homeownership: * I can't afford the monthly payment. If you were taking a mortgage of $100,000 at an 8 percent fixed rate (believe me that lower rates are possible) and taxes on the property were $1,200 per year, your PIT (principal, interest and taxes) would be $833.76. But after your tax benefits are computed, your monthly out-of-pocket cost could be below $600 per month on the mortgage payment. Since most renters are paying more than $750 per month for comparable units, renting turns out to be more expensive than owning. * I don't have the money for the down payment. There are a whole series of government and conventional loan programs for the first-time home buyer that understand that renters are not rolling in dough. If you are a veteran, no-money-down VA loans are available. FHA requires less than a 4 percent down payment on its loans up to a loan amount of $124,875. The Community Home Buyers Program, a conventional alternative, has a 3/2 option that allows a 3 percent down payment from the borrower and a 2 percent gift from a relative. If you really don't have any cash, explore rent with an option to buy or a lease/purchase option. Though you commit to renting for a while longer, at least you will have a plan to own soon. Look into equity sharing with a family member or with an investor. * I'm waiting for interest rates to come down more. Rates this year had dropped to their lowest in many a year. In the early 1980s, we thought that a 14 percent rate was a bargain. If the $100,000 fixed rate 8 percent loan dropped to 7.5 percent, you would save about $34 a month in your payment. Each month you rent, you lose that rental payment in lost tax write-offs and equity buildup at a far greater rate. This is a classic example of "false economy." Consider the possibility that interest rates might increase in the near future. An increase to 8.5 percent would cost you $35 a month more and require more income to qualify. If you are a gambler, make the application now. If rates drop, you can take advantage of the lower rate at any time prior to settlement. * I'm waiting for housing prices to come down. Housing costs in the metro Washington area have come down significantly over the past three years. However, in the first half of 1992, industry figures are showing modest increases rather than declines. From a historical perspective, no housing recession has lasted more than four years and each downturn was followed by a period of appreciation and price increases. Again, chances are a lot better that property values will continue to increase rather than decrease. Waiting for what may never happen can make you miss the best buying scenario of the past 20 years. * Housing is not a good investment for the 1990s. Let's face it - housing is a necessity, not a luxury. People can make do without a new car or pass up a vacation, but they need a roof over their heads. The population in this area is increasing as more companies relocate here, support services expand and the government grows. All data point to the metro Washington-Baltimore corridor as being one of the major growth areas for the 1990s. Housing has two alternatives - owning and renting. If available land for home building becomes scarce, if housing starts stay down and if the population continues to grow, housing will remain the excellent investment it always has been. * I'm afraid to make a decision. Fear usually is caused by the lack of good information. If you never have bought a home before, you owe it to yourself to get the facts. Talk to a friend who owns a home; talk to an accountant to better understand the tax benefits that homeownership provides; talk to a lender to explore your financing options; and, finally, contact your local Realtor to see specific houses you can afford. There is no obligation, and you will be pleasantly surprised at what you will see. Ryz Obuchowicz is an agent with Long & Foster in Alexandria. "For First-time Buyers" offers information about the logistics of buying a house. This article is copyright 1992 The Washington Times. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM