The LaPeter Team

Could You Save Money By Buying a House in 2012?

By Sue Lapeter | March 28, 2012

buy house orange countyYES! Rental rates are increasing across the country and in many areas, its cheaper to buy a house than rent a comparable one. Combine that with low house prices, historically low interest rates, and lenders loosening credit requirements, and you’ve got a real estate market that is begging people to buy houses. Buy while the market is at the bottom and it a few years you’ll be able to sell for profit.

Rental rates are increasing.

Over the past five years, the U.S. has seen a drastic increase in renters. Some people where forced to rent after short selling or foreclosing on a home. Others choose to rent because of the instability of the housing market. The increased demand for rental properties continues to drive up rental prices all across the country, including Orange County. Trulia released a report last week that said in 98 out of the top 100 US metropolitan areas, including Orange County, Los Angeles and San Diego, it is cheaper to buy than to rent. Even when you take into account all the costs associated with owning a home, such as property taxes, buying is cheaper.

Banks are making it easier to get mortgages.

A huge factor in the housing bubble burst in 2009 was the fact that banks gave mortgages to people who couldn’t afford them. In reaction to the crash, lenders went to the other extreme and made requirements so strict that many people could not get mortgages. Now, lenders are starting to find the balance.

An article published by in January said that banks are loosening loan to value ratios. This means that banks are willing to loan a higher percentage of what the house is worth. If you bought a house that was $150,000, and you paid a $20,000 down payment, then you would be getting a loan for $130,000. Divide $130,000 by $150,000 and you get .87. That means the loan to value ratio is 87%. Currently, many lenders are giving mortgages at 82%, which is a huge improvement from 74% in mid 2010.

Another sign that its getting easier to get a mortgage is the fact that banks are no longer raising the necessary credit score. Necessary credit score rose every year from about 2008-2011. Before the recession people could get a mortgage with a credit score as low as 550. Now it must be 700 for most lenders, although a few will lend to someone with a score as low as 620. While this number is still a little high, it hasn’t risen in the past year which means banks are stabilizing rather than make restrictions worse.

Prices AND interest rates are the lowest they’ve ever been.

You hear it from your real estate agent, on the news and at the bank. Interest rates are at historic lows. They are below 4% today, and the Fed has promised to keep them low until 2013. Prices are also at all time lows, and this historic combination of low prices and low interest rates makes it a perfect time to invest in a home or rental property. This is especially true if you can keep the property for at least 5 years, giving it a chance to accrue value.

What are you going to do about it?

For most people, the biggest obstacle for buying a home is the down payment. If you have money saved for a down payment, start shopping around for mortgages. Talk to real estate professionals, like Sue LaPeter, and lenders to find out what type of mortgage will work best for you and how much you can afford. Make sure your credit score is in good condition (at least 620) and start applying for loans and shopping for houses.

If you don’t have money saved for a down payment, start saving now! It can be very difficult to save when you have to pay for rising rent costs, so consider downsizing to save money. If your renting a house, rent a cheaper condo. If your renting a condo, downsize to an apartment. If your renting an apartment, stick your furniture in storage and rent a room, or find roommates. Do whatever you can to cut back on monthly costs and save for a down payment on an Orange County home. It may be uncomfortable and cramped for a while, but it will be worth it when you step foot in YOUR home, instead of somebody elses. I encourage you to downsize now, as it may take a year or more to save and housing costs are expected to increase in 2013.

Every market is different. If you’re wondering whether or not its cheaper to buy than rent in your Orange County neighborhood, give me a call at 714-728-9018 or email I can compare rent vs buying costs on houses and condos with similar attributes and tell you if buying is a smarter move for you and your family.

photo taken from phanlop88 /

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