There’s no doubt that today’s higher interest rates are making it harder for Americans to buy their first home. But even with rates increasing, buying a home is still a better option than renting for many people.
If you have FHA-eligible borrowers who are trying to decide whether buying a home today is the right move, here are a few things to keep in mind.
People Still Want Homes
It’s important to remember that interest rates aren’t the sole reason why people buy and sell homes.
Many people buy a home because they are starting a family and want to put down roots and start building long-term wealth through home equity. That includes many Millennials and even Gen Z buyers who are eager to own a piece of the American dream.
Even with higher rates, buying a home is still a great value proposition over the long haul. Plus, there’s a good chance rates may head lower in the future, at which point buyers can refinance and lower their payment. According to Fannie Mae’s August housing forecast, 30-year-fixed mortgage rates are expected to drop to 4.5% sometime next year.
Home Prices Are Cooling…
If today’s housing market has a silver cloud, it’s that home prices are finally starting to cool off. While higher rates have made mortgage payments go up, they also had the impact of slowing down the bidding wars that we saw over the past several years.
In fact, more than 15% of home sellers in all major U.S. housing markets dropped their home’s asking price in July, according to nationwide real estate brokerage Redfin. In Boise, Idaho, nearly 70% of home sellers dropped their asking prices. So did nearly 60% of home sellers in Denver, Colorado and 56% of home sellers in Salt Lake City, Utah.
…and Rents Are Rising
Yes, interest rates may have increased, but so have rents.
In August, the national average rent for a two-bedroom apartment was $2,052, a 23% jump from one year ago, according to Rent.com’s September 2022 Rent Report. This means that, in many markets, buying a home is still the superior option.
For example, in Nashville, Tennessee, the average rent for a 2-bedroom home was $2,472, according to Rent.com. Even at a 6.5% interest rate, a borrower who gets an FHA loan for $300,000 with a 4% down payment will make monthly payments of only $2,167. That means within four years, that borrower will have earned back their down payment.
And with down payment assistance, they can start saving immediately.
The Value of DPA
Just like there is rental assistance for those who qualify, there are also down payment assistance programs that can help credit-worthy first-time buyers—even in today’s higher rate environment.
CBC Mortgage Agency has helped thousands of first-time homebuyers with Chenoa Fund, its suite of down payment assistance programs, in conjunction with FHA-backed mortgages to overcome the barriers to homeownership, even during tough times. Our focus has always been working with underserved communities, particularly those who lack intergenerational wealth, and providing them with down payment grants so they can achieve their homeownership dreams.
Interested in learning how CBC Mortgage Agency can help your clients buy a home, even in today’s market? Let us know. Just give one of our representatives a call at 866-563-3507 or email us at firstname.lastname@example.org.
CBC Mortgage Agency™ – NMLS 1186381
For licensing information, go to www.nmlsconsumeraccess.org.
Illinois Residential Mortgage License #MB.6761292. Illinois Department of Financial and Professional Regulation, Division of Banking, 100 West Randolph, 9th Floor, Chicago, IL 60601 – 1-888-473-4858. Georgia Residential Mortgage Licensee, License # 1186381
The post Why Buying is Still Better than Renting appeared first on Chenoa Fund - Down Payment Assistance.