To Buy or to Rent? that is the Question.
Updated: May 30, 2021
Let's question some assumptions (A)
A: I can’t afford to buy. So I have to rent.
Q: Is that really true? You might be surprised. I would talk to a mortgage professional just to be sure.
A: Doesn’t matter, I don’t have enough in savings to make the required 20% downpayment.
Q. Are you sure? I get it. Been there. And 20% is “best,” but it's not required. If you have no savings, plus your compensation package is low, owning even a modestly priced home may not be a good idea, as you’ll need some buffer for the inevitable repairs. However, if you can afford a monthly mortgage payment equal to no more than 30% of your income, and if you have good credit, and not too much debt, many mortgage companies will offer you a product at 5% down, for a conventional loan. If you fall below a certain income level (varies by program and state), there are even 3% mortgages offered. In some states there is also closing cost assistance if you meet certain criteria. Worth looking into!
A: I definitely want to put 20% down, because less than that and I have to pay mortgage insurance. Plus, I doubt I’ll be able to sell my current house before it’s time to buy one at my new settlement anyway. And I need to do that to have the 20%.
Q: Have you ever heard of recasting? A lot people haven't. I learned of it when I was in that situation. We put down 5%, and then when my "old" house sold, a few months later, I took the money from the proceeds and “recast,” the mortgage. That cost me $150.00 total in fees, it was seriously simple paperwork, and there was no re-fi involved. So, while I did have to pay a couple mortgages for a few months, ultimately I had the lower monthly payment. And, the mortgage insurance went away, instantly. Not all companies will do this, but your agent maybe be able to find one that will.
Finally: Be sure to check out the UUA info for clergy regarding housing allowances and how that affects you. https://www.uua.org/leadership/library/ministerial-compensation