Murfreesboro Real Estate: The Good, the Bad, The Ugly

Suffice it is to say that Murfreesboro Real Estate can be complicated.

It can be easy.

It can be pretty.

It can be ugly.

One of the single largest complaints I hear from buyers right now is about PMI. It takes the No. 1 Ugly Award right now. Ugh. It has actually perturbed and irritated several of my prospective buyers to the point that they have made the decision to withhold from purchasing until they can put down 20% on a conventional loan to avoid paying it.

Why wait for the market to reach the fully corrected level with full prices to avoid a nominal monthly fee? A real estate purchase, is and will always be however,  a smart investment…regardless of PMI. Yes, even now. There. I said it. So, let’s talk avoiding PMI…

1: Get the down payment from a different source if possible (i.e. relative) in order to have your 20% on a conventional loan. The lending restrictions on these loans may be more strict, and the rates may be slightly higher than with FHA, but with FHA regardless of a 20% down payment, PMI will be required for at least 5 yrs. typically. The downside to option 1: you still have to pay the relatives back.
2.: “Lender paid PMI:”  the lender actually pays the PMI, but the interest rate gets a little bump. This sometimes, but not always, can be more cost effective than you paying the PMI.
For certain income earners having the lender pay the PMI can be beneficial because you can write off the interest on your taxes. This is honestly true for everyone, however in 2007 PMI became tax-deductable as well (for purchases 2007 and later) and for households earning less than $100,000 annually. The deduction is on a graduated scale of phasing out for up to a $110,000 annual income.
3.: Utilizing the VA loan for those who qualify.
4.: Utilizing the USDA/Rural development loan. This type of loan has an eligibility restriction on the properties that can be purchased, however, when combined with the typically lower taxes on rural properties, and the lack of PMI requirement, this loan can be incredibly cost effective. This loan can also afford up to 102% LTV (loan to value). So, down payment is avoided as well.

Historic prices, historic rates, and a corrected and balanced lending and purchasing climate all equal to the best possible time to make the investment, and even though that’s the thinking that got a lot of people into a mess, and upside down in houses etc, let’s face it: we are all being punished by stupidity. People bought things that they couldn’t afford, they got money they couldn’t pay back, and now the real estate market has been teetering on the brink for several years, but while it teetered it become a more balanced and level playing field. With new lending practices, a new appreciation for the economy and economics as a whole, and a new market flooded with affordable and cut rate housing  the real estate market is a new place…a place where those who have stable incomes, low debt, and affordability can still purchase, and purchase at a gain in many cases from day one. Sure, you have to have a down payment now, but is 3.5% really too much to ask to be able to put down on the single largest investment that most of us will ever make? Probably not. Yes, PMI sucks. It takes money out of your pocket that could be put toward the principal. But, we all pay for insurance be it automobile, home owners, life, disability, or health, what’s one more insurance payment in the grand scheme of things especially when it’s honestly short lived in most cases (and can be completely avoided with certain specs)? . Buying in this climate, where in some instances a buyer can start with equity on the date of closing, will that low monthly payment somehow magically counteract all of the benefits of home ownership to the point that it should be avoided? Absolutely not.

 

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