Michigan FHA Loans Allow First Time Home Buyers To Save Big When They Buy Instead Of Rent

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The current Michigan real estate market leaves some buyers questioning whether it makes more sense to rent or buy. Find out why buying will make more financial sense for most buyers until rates go well above 6%.

Its strange how quickly the real estate market can change for first time home buyers in Michigan. In the beginning of 2013 buyers were experiencing a large inventory of homes for sale at discount prices. On top of that, mortgage interest rates were at all time lows and this unusual combination led to one of the best buying opportunities in the last 60 years.

However, as the market improved there have been far less foreclosures and the inventory of available homes for sale has shrunk dramatically. This caused the Michigan housing market to shift from a “buyers market” to a “sellers market.” This leaves potential first time home buyers, as well as other renters, scratching their heads as to whether they should rent or own.

"The recent market shift hasn’t gone unnoticed but we’re still able to help many Michigan home buyers get into a home of their own for far less than they were paying in rent. Rates remain historically low and homes are still selling at reasonable prices" says Jason Nolan, President of Michigan Mortgage Solutions.

Comparable rental homes and homes for sale can be found using recent data from the Multi List Service. The properties chosen for this release are located in Commerce Township, Michigan and have similar square footage, amenities, and were in the same overall condition.

For the mortgage financing, lets use a Michigan FHA loan which requires a 3.5% down payment. Assuming the borrower has a 660 credit score, verifiable employment, and enough cash for the down payment the qualifying 30 year fixed rate would be around 4.0% as of October 17th.

The home that sold is located at 9551 Chaumont Dr., Commerce Twp, MI 48382. This is a 1,822 square foot home with three bedrooms and two bathrooms which sold on August 26th, 2013 for $180,000.

- Down Payment Required = $6,300
- Loan Amount = $176,739 (Includes 1.75% Upfront FHA MIP)
- P & I = $843.78
- Taxes = $243.50
- FHA MI = $195.41
- HOI = $ 75.00
- Total Payment = $1,357.69

The rental home is located at 1162 Penarth Ct., Commerce Twp, MI 48382. This is a 1,500 square foot home with four bedrooms and one and one half bathrooms which was leased on August 16th, 2013.

- 1st Months Rent + Security Deposit Required = $4,000
- Total Monthly Lease Payment = $1,600.00

So, based off the above home sale, the amount needed to move in would be the down payment of $6,300.00 and the total monthly payment would be $1,357.69. The lease would require $4,000.00 to move in and $1,600.00 per month. Buying this home would cost $2,300.00 more upfront but it would be $242.31 less per month.

Using this comparison, the home buyer would come out way ahead after the first year of homeownership in several ways;

- Saves minimally $2, 907.72 per year! That’s a lot of money.
- Income tax savings of approximately $1,400 per year. Estimation based off of $40k annual income and a tax bracket of 18%.
- Real Estate Appreciation – Homes in Oakland County appreciated nearly 12% over the past twelve months. This builds equity unlike a rental.

In fact, considering all of the above, the homebuyer would still come out ahead until rates get well above 6%. At 6% interest, the payment on the home for sale becomes $1,573.55, still $26.45 cheaper than the $1,600.00 monthly lease payment.

"Whenever rates spike over a short period of time it causes many prospective home buyers to second guess themselves and often remain renters for the wrong reasons. Yes, it’s great to get a mortgage rate below 4% but it isn’t necessary to still come out ahead when you buy a home. It all starts by working with a good mortgage broker that can “do the math” of renting versus owning” says Jason Nolan, President of Michigan Mortgage Solutions.

Michigan Mortgage Solutions is a licensed mortgage lender specializing in first time home buyer programs in Michigan. Offering mortgage products which include conventional loans, Michigan FHA loans, 100% financing with the VA and USDA Rural Development Loans.

Contact Info:
Name: Trevor Sines
Email: Send Email
Organization: Michigan Mortgage Solutions
Address: 91 N Saginaw St. Suite #206, Pontiac, MI 48342
Phone: (248) 282-4145
Website: http://www.michiganmortgagesolutions.com

Release ID: 24014

CONTACT ISSUER
Name: Trevor Sines
Email: Send Email
Organization: Michigan Mortgage Solutions
Address: 91 N Saginaw St. Suite #206, Pontiac, MI 48342
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