Monthly House Payments

Home ownership in Sacramento area often a bargain vs. renting

Home prices in the Sacramento region keep dropping, but rents are creeping up.

The result: In many neighborhoods, it doesn't cost much more to own a house than to rent an apartment, and often it costs less.

These shifting economics pushed Brent Pierce, 35, to buy his first house last August. Pierce, an analyst with Franklin Templeton Investments in Rancho Cordova, paid $185,000 for a Citrus Heights house that was bigger than his old apartment – plus it had a yard and a hot tub.

His $1,300 monthly mortgage payment is just $100 more than he paid in rent.

"That's the big reason I decided to buy," he said.

Jeff Werolin, manager of Lyon Real Estate's Folsom office, said the price gap between renting and owning in the Sacramento region is the narrowest since the early 2000s – when the local market began its big run-up.

That's not going to make much difference to the thousands of Sacramentans who have lost jobs, seen their incomes drop or don't have the credit to get a loan. But for those who do have steady employment and money for a down payment, now may be the time to make the move from renting to owning.

"In anything priced under $250,000, a buyer is going to pay less in mortgage payments than renting," said John Arvanitis, president of Sunrise Vista Mortgage Corp. in Citrus Heights.

"I've never seen a market like this."

The median price for a single-family home in the city of Sacramento was $132,000 in the second quarter of 2011, a 13 percent decline from the year-earlier period, according to figures provided by San Diego-based DataQuick.

For a house at that price, a typical buyer will pay about $949 a month, including taxes and insurance, for a 30-year FHA loan with a fixed 4.5 percent interest rate.

By contrast, the average apartment rent in Sacramento for the second quarter was $885, a 0.8 percent increase from the same period in 2010.

Once the tax write-off for mortgage interest is factored in, the price of owning the median-priced home in Sacramento is often lower than the price of renting the average apartment.

Other neighborhoods have seen a similar narrowing of the rent-vs.-own price gap.

In Elk Grove, where the median home price was $208,000 during the second quarter of 2011, a typical first-time buyer would have paid about $1,500 a month.

The average rent in Elk Grove during the same period was $1,100, according to RealFacts.

Even for higher-priced homes, the rent-vs.-own economics are increasingly favoring buyers.

Home Buyer's Guide to Good Decisions (Part 1) « Rochester Real ...

Home Equity Loan – Parents often have considerable equity built up in their own homes, and through a home equity loan, can gift a down payment for a home to their children. Often lenders will require a “gift letter” to verify the parents don’t expect repayment. In return for providing a part of the down payment, the parents (or another investor) share in the profit or net equity of the house when it is eventually sold. Ask your tax advisor for current information. Your lender can also take detailed look at your financial and credit profiles (including a credit check) and commit to lending you a specified amount of money pending specific property details. The lender will then provide you with a letter stating how much mortgage you qualify for. This process is called pre-approval. With a pre-approval letter, you can: Like planning, house hunting begins at home. We’ve learned through the thousands of home buyers we have helped that the best approach is to be prepared. What appeals to you as a buyer today will probably also appeal to buyers tomorrow. As a careful house hunter, you will benefit years from now when it is time to sell to an equally value-conscious buyer. What types of schools does your family attend now? From grade school to graduate school, and from day care needs to special vocational training, what facilities will you require in the next few years? Are there any special needs or plans? Although it is extremely difficult to compare quality of education, some statistical indicators can be helpful: Average class size at grade level; Comparative standardized text scores; Average salary of teachers; Percentage of high school graduates who go to college. For convenience, how does the neighborhood rate? Can you walk to shopping or is a car necessary? List your five most frequent destinations. Are they clustered in one stop-and-shop location? Two stops? How much time is required for fire, police, or ambulance services to arrive in an emergency? How close are cultural centers, parks, restaurants, theaters, playgrounds? n it comes to paying for a home, don’t be intimidated by the word “mortgage”. A mortgage is simply a loan made to help you finance a home. It indicates that a specific amount of money will be loaned at a specific interest rate for a specific period of time (the term of the loan). In addition, you agree to make timely payments throughout the life of the loan.

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