In today’s world, the age that people are buying their first home is becoming later and later. That is due to many factors that come into play when deciding if buying a home is the right move. The most important ones being your job security and income, the local market you live in, how
long you plan to be there in the home and in that market, and the interest rates at the time of purchase. Many people don’t believe they can even afford a home, but I find the most common problem among people in their 20’s and 30’s not being affordability, but keeping up with and maintaining a good, qualifying, credit score.
We’ll keep this local to the Phoenix market, and with rental inventory being low and steadily decreasing over the past few years, rents have been going up. In many cases, it’s common here in Phoenix and the surrounding cities that the monthly rents you’ll find for a single-family detached home are roughly about the same price as what a first-time homeowner will pay for their monthly mortgage. Whether you decide renting is best for you or you are ready to make the leap into homeownership, a good rule to live by is keep your monthly living expense between 25 percent 30 percent of your monthly intake.
Each choice has initial costs, so you’ll want to figure out what you can afford. In Arizona, when renting, typical initial move in costs on a $1,500 per month rental consist of first month’s rent, a security deposit that is in the same amount, application fees that can run upwards of $60 for anyone planning to move in over the age of 18 ($120 for a couple), cleaning fees ($300) and pet deposits ($300). That would roughly be a total of $3,720 not including any admin or other fees charged upon move in.
For those who have never bought a home in the past, you’ll want to consult your Realtor to go over the initial costs, but common costs consist of loan application fees, home inspection fees, appraisal fees, other closing costs, and of course your down payment. Most important, picking the right Realtor is crucial because the right Realtor can help you save money during the process. Often times, a Realtor can direct a first-time home buyer to a lender who can approve them, with qualifying credit scores, for down payment assistance programs that can grant them between 3.5 percent to 10 percent down payment for a home. If your Realtor really has your back, they can even do their best to fight for closing costs to be paid for by the sellers at the end of the transaction, which means, sometimes you can get into a home for as little down as the cost of just a home inspection. Typical home inspections run between $350 to $500 depending on the size and age of the home.
Last thing I’ll touch upon before wrapping up is interest rates. Based on the 45-year average, interest rates are still below average. For a first-time home buyer, they may not know what their parents had to pay in interest rates when they got their mortgages in the 80’s, 90’s and even early 2000’s, but the average is upwards of 8.5 percent. Current rates are between 4.5 percent and 6.5 percent, depending on your credit score. Although home prices seem like they’re nearing the top of the market, if you plan on being in your next home for five or more years you shouldn’t be concerned with any market dips because likely you will pass right through them anyways.
If you have any questions or need help searching for a home, feel free to reach out to me today at TGremo@JasonMitchellGroup.com, and I would be glad to meet and go over the process with you. You can also click here. —Tom Gremo