Heath's Blog


Renters Can Lose $8000 This Year on December 1!

If you are renting on December 1, 2009 you just lost $8000. Here's why!

People who have not owned a home in the last three years are called First Time Buyers by the US Government.  Those First Time Buyers can get $8000 IF they close on a property before December 1, 2009.  So how much house can a renter buy?

One of the old calculators I use shows how much real estate a person with the following income levels might be able to purchase.

The numbers below are as follows: Annual Income (AI), Monthly Income (MI), Maximum Monthly Payment (MMP), Other Monthly Debts (OMD), Price of a Property per Interest Rate of 5%, 6%, and 7% (NOTE: These are ONLY estimates for conversation.)

(With 5% down)
20,000 (AI)    1667 (MI)     467 (MMP)     133 (OMD)     at 5%   66K    at 6%  61.5K     at 7%  56.9K
30,000(AI)     2500 (MI)     700 (MMP)     200 (OMD)     at 5%  100K   at 6%  92.2K     at 7%  85.2K
40,000(AI)     3333 (MI)     933 (MMP)     267 (OMD)     at 5%  133K   at 6%  123K      at 7%  113K

Another method I use is to compare a current rental payment with a mortgage payment at the same amount. For example, if the rent being paid is $900/month, I divide the 900 by 6 and get 150.  That indicates that someone paying a rent of $900 per month could possibly pay a mortgage on a $150,000 property. 

Here is how I used math to get that: First, 6 is the interest rate multiplier when calculating interest on a loan with a 6% interest rate. So, I could multiply six by loan amounts until I get 900. 100 x 6 = 600; 125 x 6 = 750. 150 x 6 = 900.  (Note: you leave off the last 3 zeros of the loan amount for this type of calculation.) 

Or, I can "reverse" the same equation and use the monthly rent amount divided by the interest rate multiplier which then equals the loan amount. This liiks like; 900 / 6 = 150.

Of course other variables will affect the purchase ability of a buyer.  Things like credit score, amount of down payment, and the total of the other debts the buyer has, and the condition of the property, are some of the major ones.  First Time Buyers (people who have not owned a home in the last 3 years) have a major advantage right now, because the US Government will provide you with $8000 of down payment money.  But you have to find a house quickly and close before the end of November 2009!  Call a broker and get started! You only have $8000 and your own home to lose!

Happy real estate buying! 

Heath Coker, Associate Broker
Robert Paul Properties
www.CapeGroup.com / capegroup@capegroup.com
508-274-5613  Licensed in MA
Its a beautiful day on Cape Cod!
@CapeGroup  Skype: heath.coker

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