Chances are that if you’re renting, you’re spending too large a percentage of your monthly income on housing. The rule of thumb has always been that a household should not spend any more than 28% of their income on monthly rent or mortgage payments. This percentage allows households to cover expenses, while also saving for the future.
According to new data provided by industry resource KCM and Apartmentlist.com, 49.5 million renters in the U.S. were cost burdened in 2017, meaning they spent more than 30% of their income on rent. This statistic accounts for nearly half of all renters in the country and is up 3.1 million households from a decade ago.
While paying such high rents, it is difficult to save for the future.
But renters shouldn’t be discouraged. Those who can save at least 3% for a down payment can become homeowners. In fact, the percentage income needed to buy a home is significantly less than renting at 17.1%!
Here on Cape Cod where rents for small, two bedroom apartments can be higher than mortgages, there are many who dream of owning their own home, but don’t believe they can afford it.
Our best advice is to speak with a reputable lender to determine from a professional what your position is. The advice is free and often more reliable than family members, who can discourage — not encourage — home buying, particularly for young people.
Realtors are also willing to speak with potential buyers to provide a current reading of the market, as well as on going information, while money is being saved for a down payment or credit card debt is being reduced.
If you’re interested in an informational session, we’d be happy to meet with you. Please contact us using the comment section or calling 508-568-8191.
If you are thinking about buying, here are some additional terms that you should be familiar with:
Closing Costs: The cost to complete the real estate transaction. These can include taxes, title insurance and attorney fees.
Credit Score: A number ranging from 300 to 850 that is based on analysis of your credit history. This helps lenders determine the likelihood that you’ll repay future debts.
Real Estate Professional: An individual who provides services to assist in the buying and selling of homes. Realtors help you through the process, assist with often confusing paperwork, and provide advice based on their professional experience.
For the latest financial news and how it’s impacting the real estate market, please check out The Markets in a Minute from our partners at Residential Mortgage Services.
Mari and Hank