Why Rent When You Can Buy a Home?
Buying your first home is an exciting experience, but the idea can be scary, too. It means jumping into a whole new world of responsibilities that don’t exist for renters. Homeownership also comes with many advantages. With so many opportunities out there, why rent when you can buy a home? At Alvarez Construction Company, we wonder the same thing.
The housing bubble that burst about 11 years ago scared a lot of people. They feared that the value of real estate investment no longer existed. Well, we’ve rebounded from that crisis (and learned many lessons as a result). Home prices have not just come back from the downturn but risen over the last few years. In the Baton Rouge market, average home values have increased at an above-average rate for the past decade, with an estimated annual appreciation rate of 5.03%.
Think about that. How much does your rent go up every year? The average in Baton Rouge is a 7.36% increase.
What do you get for your added expense? Is the landlord making valuable improvements to your home or apartment to justify the higher cost? Are utilities included in your rent which would prompt the jump? In most cases, your higher rent represents more profit for the property owner. If you assume they have a fixed rate mortgage, their cost is not increasing, except for possibly the property taxes (and that’s certainly not equal to the “cost of living” increase added to your rent).
The low cost of buying a new home
When looking at where your money goes, understand the difference between expense and investment. An expense is a cost. It’s the price you pay for what you want and need. Conversely, an investment is intended to deliver a profit, like stocks. You buy into it with the plan to make money—a return on investment.
The rent check you write every month is an expense. Buying a home is an investment. The home you buy this year will be worth more next year and the year after that. It will continue to grow in value, giving you a dividend that is defined as equity.
In Livingston Parish, the median rent is $847 per month. The median monthly homeowner cost of mortgage, property taxes, insurance, and utilities is only $8 more—$855. Could you afford $8 more to own a home?
Low down payments
For many first-time homebuyers, it’s not the mortgage payment that’s out of reach, but the down payment. That doesn’t have to be a deterrent either. Many home loan programs are available with low and NO down payments. The USDA home loan, for example, will finance 100% of your purchase. Designed to encourage homebuying in rural and semi-rural areas, this mortgage program is an open door to buying your first home. Alvarez Construction Company has various communities of single-family homes that qualify for the USDA home mortgage with zero down payment:
- Cella Gardens in Denham Springs
- Deer Trail, Phase 1 and Phase 2, in Madisonville
- Grove at Ascension, in Prairieville
- Ironwood Estates, in Prairieville
- Lexington Park, in Baton Rouge
- The Sanctuary at Juban Crossing, in Denham Springs
If you have saved even 3.5% down payment, you could buy a home with the FHA home loan, as long as your credit score is 580 or higher. You still get competitive interest rates, too. With a FICO score between 500 and 579, you could qualify for the FHA loan, but will need 10% down payment.
Convert expense to investment
Every month you wait is more money that leaves your bank account with no hope of returning. Take a look at the Alvarez Construction Company’s communities of new construction homes in and around Baton Rouge. We build fully appointed homes that feature the latest in energy efficient and contemporary design, with floor plans from 1,592 square feet to more than 2,500 square feet. Get started on an investment in yourself and your life. contact Matthew Petty to learn more about our homes, the construction process, and the ease of becoming a homeowner.