Hmm...the Million Dollar Question - should your rent or buy your home in Sacramento?

I have been speaking with a lot of prospective first time buyers lately, and it seems that the overall sentiment among them is that it has become more affordable to buy a home than rent a home. In many areas and under many circumstances, I believe this to be true. When you take into consideration the average home price and probable monthly mortgage payment in particular Sacramento neighborhoods vs. the average rent, often times the mortgage payment is less. Let's take a look at a few different areas...just for the sake of citing my information sources, for average home price (used to calculate mortgage payment scenarios) I am using most recent January 2011 Trendgraphix data which is taken directly from MLS, and for average rent I am using the most recent Q1 2011 Homepointe Quarterly Residential Rental Survey. For my mortgage payment calculations, I am basing it on a 5% interest rate (which is actually above today's average market interest rates), and including the full PITI - loan principle, interest, monthly property taxes, and monthly homeowner's insurance (and mortgage insurance where applicable).

Natomas - 95833, 95834, 95835
Average single family home sale price: $199,000
Average rent for a 3 bedroom home: $1,361
30-Year Fixed VA Loan (Zero downpayment): $1,357
30-Year Fixed FHA Loan (3.5% downpayment): $1,451
30-Year Fixed Conventional Loan (10% downpayment): $1,319
30-Year Fixed Conventional Loan (20% downpayment): $1,120

Elk Grove / Laguna - 95757, 95758
Average single family home sale price: $223,000
Average rent for a 3 bedroom home: $1,392
30-Year Fixed VA Loan (Zero downpayment): $1,627
30-Year Fixed FHA Loan (3.5% downpayment): $1,400
30-Year Fixed Conventional Loan (10% downpayment): $1,478
30-Year Fixed Conventional Loan (20% downpayment): $1,255

Rosemont / College Greens - 95826, 95827
Average single family home sale price: $147,000
Average rent for a 3 bedroom home: $1,230
30-Year Fixed VA Loan (Zero downpayment): $1,002
30-Year Fixed FHA Loan (3.5% downpayment): $1,072
30-Year Fixed Conventional Loan (10% downpayment): $975
30-Year Fixed Conventional Loan (20% downpayment): $827

Arden - 95821, 95825, 95864
Average single family home sale price: $207,000
Average rent for a 3 bedroom home: $1,226
30-Year Fixed VA Loan (Zero downpayment): $1,411
30-Year Fixed FHA Loan (3.5% downpayment): $1,510
30-Year Fixed Conventional Loan (10% downpayment): $1,372
30-Year Fixed Conventional Loan (20% downpayment): $1,165

Carmichael, Fair Oaks - 95608, 95628
Average single family home sale price: $246,000
Average rent for a 3 bedroom home: $1,360
30-Year Fixed VA Loan (Zero downpayment): $1,677
30-Year Fixed FHA Loan (3.5% downpayment): $1,795
30-Year Fixed Conventional Loan (10% downpayment): $1,631
30-Year Fixed Conventional Loan (20% downpayment): $1,384

Citrus Heights, Orangevale - 95610, 95621, 95662
Average single family home sale price: $179,000
Average rent for a 3 bedroom home: $1,293
30-Year Fixed VA Loan (Zero downpayment): $1,220
30-Year Fixed FHA Loan (3.5% downpayment): $1,306
30-Year Fixed Conventional Loan (10% downpayment): $1,187
30-Year Fixed Conventional Loan (20% downpayment): $1,007

South Land Park, Pocket / Greenhaven - 95822, 95831
Average single family home sale price: $189,000
Average rent for a 3 bedroom home: $1,240
30-Year Fixed VA Loan (Zero downpayment): $1,288
30-Year Fixed FHA Loan (3.5% downpayment): $1,379
30-Year Fixed Conventional Loan (10% downpayment): $1,253
30-Year Fixed Conventional Loan (20% downpayment): $1,064

Obviously there are other tangible and intangible benefits to home ownership as well...for example, a tangible benefit is the fact you can write-off your mortgage interest on your income taxes, and also deduct some other related expenses each year. An intangible benefit might be that as a homeowner, you have the freedom to paint the walls, decorate, plant a garden, remodel, etc.

So clearly these numbers are just a baseline to give you an idea of housing affordability in certain areas. You definitely need to consult a loan officer to see what type of financing is the best fit for you, and ultimately just how much you can afford - and there are several variables that will affect your interest rate and terms. You should also speak with a CPA or qualified tax professional regarding the mortgage interest and other tax deductions to see how it will affect your particular situation. If you need a good referral to either one, feel free to contact me and I can put you in touch.