Foreclosure Help Blog

OWNING VS. RENTING

There are many good aspects of homeownership. First and foremost is concept of generating equity. When you are renting, your cash is not going towards anything, it is basically going out the window. When you make payments on a home, you are paying for an asset that has a market value. When you sell your property, you theoretically will re-coop all the money paid.

Another positive aspect is that interest on mortgage payments is tax deductible. It is hard to deduct rental payments. If you are a savvy buyer you can identify and close on deals that are below market prices, therefore allowing you to “buy into” some equity. Real estate ownership is the principal wealth of the average American homeowner.

There are however, many properties in foreclosure, the highest rates in history. This is due to a variety of reasons, but in many cases job-loss, divorce and medical issues cause homeowners to struggle making payments. Typically after 3 missed payments to a mortgagor or lender, the foreclosure process can be initiated. Home ownership, just like any other important responsibility, can be a very positive decision if managed properly. Those that are unorganized or not capable of maintaining a set budget often times struggle making payments.

Current sky-rocketing foreclosure rates are also due to loose lending standards during the height of the real estate boom up until 2005. Many homeowners were sold into ARM’s (adjustable-rate mortgages) and other exotic lending instruments. Debt/income ratio was frequently overlooked when really it is the best measure of how credit-worthy a potential homeowners borrowing ability really is.

It might be a good idea to run the numbers on your monthly income compared to what you can afford for housing. Take into account down payment as well which is typically required in today’s market, most banks and lenders are not very quick to loan 100% financing.

You can run mortgage calculations and learn more about renting vs. owning at any mortgage lending site online.  Keep in mind that most banks and mortgage lenders are saturated with bad loans that they are attempting to work through.  This means that getting approved to purchase a home is not as easy as it used to be.  That being said, a borrower with good credit and stable income has a very good chance of receiving financing.  The real estate industry has been in a state of correction over the past 2 years.  Now it is back to the fundamentals.  Those that can afford and are qualified to own property are the only ones capable of doing it right now.  Imagine that!!