Creston/Cheshire FSBO 3BR/1.5BA Discovery Purchased for $112,500

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For sale by owner at 1105 Aberdeen discovered for a buyer. Seller having trouble selling due to lots of small repairs. Sold $112,200. Two large bedrooms on the upper level and third bedroom on main floor. Kitchen with pallet highlight wall and plenty of cabinet space, full bath, entry way, 3 season room and large living room/dining room area on the main level. Basement 1/2 bath, washer and dryer and storage space.

 

Household Net Worth of Homeowners vs Renters

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I sat in on a two hour talk with Lawrence Yun the other week, and it was great. One of the things he brought up that really stuck is how directly home ownership can affect a family or individual’s net worth. Here’s an illustration of the results of the government survey he quoted:

household-net-worth

In the short term, it may or may not be considerably easier to lease. But, investment in a home can absolutely help out in the long term, as a homeowner pays down the balance and achieves more and more equity. This is one major reason why the federal government offers so many incentives for first time buyers:

Let FHA Loans Help You
MSHDA Downpayment Fairy
Fannie Mae FIRST LOOK listings
(only available to owner occupants)

I Could’ve Saved $38,000!

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In 1998, I purchased my very first home with an interest rate just over 7% and I was thrilled. It is a 2-unit, I still have it as an investment, and I refinanced just this past week to an non-owner-occupant rate of 4.5%. Being a numbers guy, I calculated that with no re-fis, I would have paid $96,353 in interest until now. If I’d had an original rate like I received this week, my to-date interest would have been $58,377.  That’s a difference of $38 Grand!

When I think about it, it is astounding how great the buying climate is today for buyers. You’ve heard that home prices are at a long-time low, but money is also very cheap. This is a wicked combination! I’m focusing on interest rates only for this post. Here is a chart of interest rates, from when I personally started purchasing until now:

Bringing it Home

What does this mean for you, a buyer in today’s market? Here’s an example:

You qualify now for a $100,000 mortgage. All factors the same, we warp you back to 1998 with 7.1% interest rates. You are now qualified for a $77,000 purchase.

Lets modernize this. Say you qualify in Fall 2011 for a $100,000 mortgage at 4% interest. You wait awhile and interest rates go back up to 5.85%, a rate we saw a couple of years ago. You are now qualified for a purchase price of just over $85,000 with the same down payment and loan terms.

Lets flip it around:

You purchase a $100,000 home and put $3,000 down. Here’s how much interest you pay over the life of the 30 year loan:

7.1% (like 1998): $137,674
4.0% (like right now): $69,713
5.85% (like…the future): $109,007


$100k will get you this home in West Michigan, or one of many others:

A $100,000 West Michigan home, MLS# 11038124.

 

 

Buyers, I have news for you: Now is the time!

Time to make a choice!

(a) Now
(b) Later

Pete Bruinsma is an Associate Broker at Grand Rapids Realty in West Michigan. © www.PeteBruinsma.com