Yesterday I met with some clients to discuss getting a mortgage instead of leasing another apartment. They are renting a 3 bedroom 1 bath apartment in Everett, a suburb of Seattle WA, for $1210 per month. She called me to ask about finding another rental. I told her that I don’t deal in rentals but maybe if she wanted she could buy a home for the same money as what she rents.
At first she didn’t believe me but I had proof. I went to an agent friend of mine and we searched the MLS for homes for sale in Everett, WA. To no surprise we found many homes for sale below $200,000. Our parameters were minimum 3 bedrooms, 1.75 baths and 1000 square feet and no short sales. Well there was 28 homes in Everett all of them ready to go. Given that her son is on active duty he can buy with his VA mortgage and her as a co-signer. The full payment for a $169,000 – 3 bedroom, 1.75 bath, 1250 square foot home with a 2 car garage is $907 per month. That’s with a 5% fixed 30 year mortgage with an APR of 5.22%. Add taxes and insurance they are at $1097 and that is less than the rent they are paying now.
Next we had to address her poor credit. After pulling a tri-merge credit report we knew she would not qualify for a home mortgage until she got her credit to the magic 640 score. It may take her a few months to get there but so what. Because you see even if it takes 6 months to fix the credit there will still be homes for sale she can afford. And if she didn’t fix her credit 6 months from now she will still be renting and still have poor credit.
Let’s examine this in greater detail.
What does it take to buy today?
First you need a 640 middle credit score. That is not hard to do but may take some professional help. I know of half a dozen repair services that will get you to 640 in a few months. There is a cost but again so what. Imagine what you can save if you have decent credit. Well the next time you renew your car insurance you will save a few bucks, the next car you buy a car you will save a whole lot more and so on. So even if you have to invest $400 to $500 to fix your credit, again so what.
Next you will need a down payment. If you must buy in the city you will need 3.5% down. On a $200,000 home that’s only $7000. That down payment can come as a gift from relatives, your boss or a 401K from savings. On a $175,000 home it’s only $5950 down. How much was your tax refund?
Or you can buy out in the country east of Hwy 9 and get a home for ZERO down. Or if you or someone in the family is a veteran you can buy anywhere for ZERO down.
Interest rates of a fixed 30 year mortgage are in the low %5 to high 4% range.
Given low interest rates and low home prices you simply can’t wrong.
Consult a good loan officer and find out if you can take advantage of this once in a lifetime opportunity of low mortgage rates and low home prices.
