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Should you buy or rent a home? When you examine the benefits of owning real estate, it becomes clear that the answer to this question seriously depends on a borrower’s financial needs at the time of purchase or rental as well as long-term financial goals.

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October 14, 2019
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FHA Loan Articles

News and Updates for Homeowners

Buy or Rent? FHA Loans Make Owning More Affordable

Buy or Rent? FHA Loans Make Owning More Affordable
December 16, 2018 - Should you buy or rent a home? When you examine the benefits of owning real estate, it becomes clear that the answer to this question seriously depends on a borrower’s financial needs at the time of purchase or rental as well as long-term financial goals.

Renting A Home Comes With Zero Added Long-Term Financial Benefits Compared to Home Equity

When you purchase a home with an FHA mortgage loan, you are investing in property that will gain equity as your loan principal is paid down, and as housing market trends push property values higher, there is added value in owning a home.

What kind of value? The ability to refinance with cash-out is one benefit. A borrower who has a home appraised at a specific amount before purchasing and has the home appraised again a few years later for refinancing may note an increase in the appraised value (depending on circumstances).

When property values are on the rise, your borrowing power has the potential to increase for cash-out refinancing. When you rent a home there is no such option.

Buying a Home Means Freedom to Renovate, Remodel, Repair at Your Convenience

Renting means being stuck with the same color scheme, basic layout, and fixtures that come with the rental property. Owning means the freedom to change paint colors, do away with paint altogether in favor of wallpaper or paneling, etc.

What Makes The FHA Loan Option More Affordable?

The FHA loan minimum down payment is only 3.5%, and you may be able to find down payment assistance from a program in your area and/or negotiate with the seller to fund certain closing costs up to six percent of the asking price of the house. These types of options mean potentially lower out-of-pocket expenses up front.

The ability to finance certain approved closing costs can make the initial loan more affordable, too.

Borrowers who want to stay in the home a long time and don’t plan to sell may wish to pay more in cash up front to avoid a larger loan balance, but if your goal is to save as much money up front as possible, financing certain permitted expenses is a good option to consider.

Talk to a participating FHA loan officer about the options for FHA mortgage loans and how you can save as much money up front as possible. Even if you plan to pay cash for certain expenses rather than finance them, knowing your options is a very good idea.

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