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Scott Sumetz's Blog

By Scott Sumetz | Mortgage Broker
or Lender in Portland, OR

Renters Have Much to Gain by Pursuing Home Ownership in 2009, but you better hurry!

For immediate release August 12, 2009

A Qualified Mortgage Consultant Can Outline Your Options

Renters Have Much to Gain by Pursuing Home Ownership in 2009, but you better hurry!

By Scott Sumetz,
Portland Home Mortgage Advisor


Portland, OR – Are we there yet?  This is a question I keep hearing from my Portland home mortgage clients, who all want to get an opinion on if we are at the bottom of the real estate slide here in Portland.  There seems to be no shortage of professionals, friends, family that want to weigh in on an answer or thought one way or the other.   That has made me stop and think and come up with my own question: When is the right time to get into the market as a first time home buyer?  My answer is NOW! 


The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can either access this credit after filing their tax returns with the IRS or "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent which is the minimum down that the borrowers need to secure the loan.  This excess can be used to lower the loan amount by putting more down, assist with closing costs and or buying the rate down.


Yes, buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment.  Lately we just happen to be in a correction, but overall since the early 1900’s properties have risen substantially in value over the long term. It is also an achievement that offers a sense of pride, financial stability and potential tax advantages.


Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.


The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!


However, if you were to purchase your own home or condominium, you would be well on your way toward building some equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.


In addition to building equity, there are current tax advantages as mentioned above that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.


To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.


There are many different types of loan programs available, including the “low” down payment option with an FHA mortgage. These types of programs require the borrower to provide 3.5% percent of the purchase price as down payment. There are options where that money can come from so consult your Mortgage professional to find out about the rules. FHA lenders also have a rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed around 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.


Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the current advantages of purchasing real estate in this Portland home market. Prices are near levels they were a few years ago, interest rates are still near 50 year lows and the 8k Uncle Sam is giving you will disappear November 30th 2009.  If this sounds like something you may be interested in, then you better hurry and take advantage of this opportunity while it lasts.  Get pre-approved and find and agent and lets go!


Until next time,


Scott Sumetz


 “The Sumetz Group” and “My Portland Home Mortgage” are affiliated with Sterling Home Mortgage MB- 0906813.   Scott hosts Home Buyer’s Seminars which are open to the public on the first Tuesday of each month at different locations throughout Portland. Seating is limited so to reserve your seat at the next event, e-mail Scott@thesumetzgroup.com or call 503-941-5025 to RSVP and obtain a free copy of The Sumetz Group’s Home Buyer Handbook.  Don’t forget to visit Scotts Blog at:  http://www.myportlandhomemortgage.com

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