4 Rent vs Buy Facts Your Landlord Doesn't Want You to Know

A big part of the American dream is to own a house, white picket fence and all.  There are some Americans however who do not want to see others achieve the dream and this is landlords. They obviously lose income  when renters become buyers. Renters have misconceptions about buying which some landlords are only too happy for them to keep believing.  There are four main rent vs buy facts that landlords would want to remain unknown or misunderstood by their tenants.

1) It's affordable 

One fact is that it's not cheaper to rent than to buy.  Renters keep renting believing that they cannot afford to buy.  They need  to  understand the dynamics of supply and demand which is the cornerstone of economics. When supply is fixed and demand increases, prices go up because people are willing to pay more for something that many other consumers are looking to buy.

This concept also applies to the real estate market.  At the moment, the demand for rental market is high because the real estate though recovering is still sluggish and so is the economy that would really rev up demand for houses to buy. 

The truth about the rent vs buy debate is that there is always a market that favors buyers out there and where houses are still affordable. Also, there are buying arrangements like rent to own schemes as well as state and federal home buyers incentives that put the dream of owning a house within the reach of the average American.

2) The credit score  needed to buy and rent are the same

Another secret that landlords hope to go on keeping from renters is that the credit score required  to buy is the same one required to rent. There is the misconception that a much higher credit score is required to buy compared to the one required to rent because buying is a much bigger financial commitment.

This belief puts off people who have low credit scores from applying for mortgages because they believe there is no way they can qualify for a home loan. The truth is that if you can rent, you can buy. Landlords are just as wary to renting to renters that are considered high risk as lenders are of lending to people whose scores indicates that they are highly likely to default on their mortgage payments.

Some landlords will even go as far as exploiting those with poor credit scores by charging them higher rents. Believing they are lucky to even get a place to rent, some people fall for it and remain there for a long time,  too afraid to raise a complaint against high rent let alone to think about looking into buying.

3) Record low interest rates 

Landlords also prefer that tenants do not grasp how affordable houses are thanks to interest rates that are at an all time low. The market is recovering but the recovery path is still delicate and lenders and investors have to keep the rates low to encourage buyers.  Investors and owners are eager to get rid of property they have been holding on for a long time since the property market started to slide. Landlord themselves are taking advantage of the interest rates to refinance their mortgages or take loans to put up or buy more houses for sale or rent.

Incentives such as those offered by the Federal Housing Association (FHA) where loans can be taken with a down payment as low as 3.5 percent in some states should be taken advantage of.  What this means is that one wanted to buy a home valued at $ 300,000, the deposit required would be $ 10,500.

If this seems higher, consider the fact that it is not very different from getting an apartment or single family home where you are required to pre-pay rent  for the coming month and to put down a security deposit.  If you can put down $ 6,000, you can top up and put down a deposit and start building your own equity instead of contributing to the landlord's mortgage payments.

4) It's  long and complex

There are many false beliefs about how the complexity of the buying process. Renters believe that it's difficult, drawn out and that one is put under a lot of scrutiny.  It's actually not very different from renting. Both involve a lot of searching, negotiating, having checks done on you and quite a bit of paper work.

There is the option of hiring a real estate attorney and Realtor to do the search for you and to ensure that due process is followed. Mortgage brokers are also available to do the legwork of applying for mortgages from various lenders and getting you the best rates while they are at it. 

Go for it

Nothing is holding you back but your own misconceptions. Resolve today to live the dream and start talking to a lender.

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