June 30, 2023
Mortgage loan interest rates have increased significantly since hitting all-time lows in years past. In 2023, some renters are now wondering whether it’s smarter to rent or own in the current housing market.
Some can afford to wait to buy until the rates return to a consistently lower range, but others have to buy soon, no matter what the state of the housing market.
FHA Loans Versus Conventional Loans
And for these borrowers, FHA loans, being government-backed, often feature interest rates and terms competitive with some conventional alternatives. They can also be competitive with conventional loans when it comes to terms.
No penalty for early payoff, the ability to refinance with an FHA Streamline should conditions make that option more viable, and a lower down payment requirement are all features of the FHA loan program you should compare side-by-side with conventional loans.
FHA loans require a minimum 580 or better credit score for the lowest down payment of 3.5%. FHA loans require an appraisal in typical cases, but if you want to buy a fixer-upper that won’t pass an FHA appraisal until after the renovation work is done, there’s an FHA mortgage for that.
Use A Mortgage Calculator
Buying or renting may come down to crunching the numbers. Using a mortgage calculator can be as simple as taking the amount you pay in rent and comparing it to the costs of an FHA mortgage.
You’ll need the amount you’d like to borrow, a possible or projected interest rate, the down payment, and a few other basic figures.
Once you’ve plugged these numbers into the buy-versus-rent calculator, you’ll get an excellent idea of how your dollars could be used for an FHA mortgage compared to what you’re spending now on your lease.
Does the math make more sense to own rather than rent? For many, the answer is yes.
A mortgage calculator does have its limits. Certain assumptions you’ll make regarding interest rates and other numbers may differ when you use the actual rates and other numbers instead of guesstimating them. The calculator provides an estimate only.
When it is time to fill out an FHA loan application, consider getting pre-qualified for a FHA mortgage loan to start your house-hunting journey. Pre-qualification shows sellers you aren’t just window shopping.
