HOME FINANCING MATTERS: Don't Wait To Buy A Home

Home Financing Matters: Don’t Wait to Buy A Home

by Richard Swan

A client came to my office recently and indicated that she wanted to look at buying a home in about 5 years.  “Why wait so long?”, I asked.  She told me that she attended a financial workshop at her church and what they had learned was not to buy a house until you can afford to do a 15 year loan.  I said, “Wait a minute, somebody is trying to sell you a bridge in New York.”

The main thing left out of the self-proclaimed guru handbooks on financing is that everyone has to have a place to live.  How you choose to do that will be the answer to your financial success.  With this particular woman, she was living in an apartment and paying about $900 per month in rent for 2 bedrooms, a kitchen, and a living room.  I told her that she could have more than that amount of room, plus a garage for less than what she was paying in rent.  “How?”, she asked.

You can buy a home in Tennessee for very little money down and in some cases with no down payment.  Rates right now are still extremely low and the difference in the cost of a 15 year loan and a 30 year loan is very small; maybe $5,000 over the life of the loan.  In two years, you will have spent $21,000 in rent with nothing to show for it.

In the five years she was intending to wait to buy a home, she could have $6,000 to $9,000 in equity already built in, without the added appreciation that most people see from their real estate investment of 2%-3% per year.  For most people who work for someone else in a clerical, manufacturing, office, or retail position, their home represents their biggest investment.  Many of those same individuals spend years, and thousands of dollars, wasting money on rent.

If you are currently living rent free with family or friends, then do that and set money aside to save for a house, but if you are currently renting and would like to talk about buying a house then give me a call to discuss your options.

If you have questions about financing options or credit scores, call me at 865-742-3384.

Copyright ©2015 Richard Swan

This blog is for informational purposes and is the opinion of the writer.  In financial matters always solicit professional advice and legal counsel if necessary.  

Home Financing Matters: What is a Reverse Mortgage?

Last week a Realtor called me asking about Reverse Mortgages and his underlying tone was really asking, “Are they safe?”  That started about a 30 minute conversation about the nature and purpose of a reverse mortgage.

Reverse mortgages are like any product or service, they are as good as the people behind them.  The risk to any undertaking is understanding the company you deal with and the guarantor behind the program.  FHA offers a reverse mortgage and its purpose is to help older individuals, or couples, stay in their home while reducing their monthly expenses.  Borrowers must be at least 62 years old at the beginning of the mortgage period and there is no limit as to how long they can occupy the home as their primary residence.

The borrower continues to own the home throughout their lifetime and is responsible for the maintenance, yearly taxes and insurance on the home, but never has to worry about making a monthly mortgage payment.  As long as at least one of the borrowers is able to continue to live in the house as their primary residence, then the house remains in their possession.  At the time of their death, the lender would give the family or their heirs up to 12 months to sell the property, and they would still be entitled to any equity but could not be held responsible for any loss on the lender’s part.

Reverse mortgages serve a purpose to allow elderly individuals on a limited income to remain in their home, while reducing their monthly housing expense by reducing their mortgage payment.  As with any loan product, borrowers should thoroughly discuss their loan with the lender and satisfy themselves with their options.  The one great thing about an FHA Reverse Mortgage is that it requires the borrower to go through a HUD/FHA approved counseling course before any decision is made.  

The course is taught by a third party not associated with the lender and the borrower must complete the course before the loan process begins.  A reverse mortgage may not be for you, but talk with your family, your lender, and a counselor before you rule it out.

Copyright ©2015 Richard Swan

This blog is for informational purposes and is the opinion of the writer.  In financial matters always solicit professional advice and legal counsel if necessary.