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The ‘Renter’s Trap’ and how to get OUT

Thursday, August 28, 2014   /   by Rummy Dhanoa

The ‘Renter’s Trap’ and how to get OUT

Don’t Get Caught in the ‘Renter’s Trap’ | Keeping Current Matters 

In a recent press releaseZillow stated that the affordability of the nation’s rental inventory is currently much worse than affordability of the country’s home sale inventory. The release revealed two things: 

  1. Nationally, renters signing a lease at the end of the second quarter paid 29.5% of their income to rent
  2. U.S. home buyers at the end of the second quarter could expect to pay 15.3% of their incomes to a mortgage on the typical home

Furthermore, renters pay more than the average of 24.9% that was paid in the pre-bubble period while buyers actually pay far less than the 22.1% share homeowners devoted to mortgages in the pre-bubble days. 

Don’t Become Trapped

If you are currently renting you could get caught up in a cycle where increasing rents continue to make it impossible for you to save for a necessary down payment. ZillowChief Economist Dr. Stan Humphries explains:

"The affordability of for-sale homes remains strong, which is encouraging for those buyers that can save for a down payment and capitalize on low mortgage interest rates… As rents keep rising, along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult for millions of current renters.”

 

Know Your Options

Perhaps you already have saved enough to buy your first home. HousingWire recently reported that analysts at Nomura believe:

“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. 

It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)


Freddie Mac came out with comments on this exact issue: 

  1. A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
  2. Freddie Mac's purchase of mortgages with down payments under 10 percent more than quadrupled between 2009 and 2013.
  3. More than one in five borrowers who took out conforming, conventional mortgages in 2014 put down 10 percent or less.

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible to get a mortgage. 

 

KCM REPORT 

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The data relating to real estate for sale or lease on this web site comes in part from One Key, Inc. Real estate listings held by brokerage firms other than Rummy Dhanoa - eXp Realty - New York Real Estate Experts are marked with the One Key, Inc logo or an abbreviated logo and detailed information about them includes the name of the listing broker.

The information appearing herein has not been verified by One Key, Inc or by any individual(s) who may be affiliated with said entities, all of whom hereby collectively and severally disclaim any and all responsibility for the accuracy of the information appearing at this web site, at any time or from time to time. All such information should be independently verified by the recipient of such data. This data is not warranted for any purpose.

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