Home buying is the smarter choice than renting, according to Trulia’s Winter 2012 Rent vs. Buy Index. 

Buying a home is more affordable than renting in 98 of the nation’s 100 largest metro areas, according to the index, which tracks asking prices for rental units compared to for-sale homes in major metro areas.

The only two metros out of the 100 tracked where renting was found to be the better deal: Honolulu and San Francisco. Still, the index notes that if you plan to stay in those markets more than five years, you might still be better off owning than renting in those markets too. 

Falling home values and low mortgage rates have made home ownership more affordable. Meanwhile, rents have been on the rise. 

“As rents rise and prices stagnate, home ownership is becoming even more affordable, but rising rents create a dilemma for people who can’t afford to buy yet,” says Jed Kolko, Trulia’s chief economist. “Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring home owners face.”

For the first time in 18 months, home prices in February rose higher. With a median price of $171,881, prices in the 53 cities surveyed by the RE/MAX National Housing Report rose by 1.1% over February 2011. Home sales were even higher, up 8.7% from one year ago. With a positive sales trend of 8 straight months above the previous year, it’s looking like 2012 will witness a very strong home-selling season. As a result of reduced foreclosure activity, inventory continued a downward trend for the 20thstraight month, 22.4% lower than the housing inventory in February 2011. Consumer sentiment appears to be rising, and record low mortgage rates coupled with favorable home prices are attracting home-buyers and investors who don’t want to miss a historic opportunity.

Opportunities in the housing market continue to grow for buyers and sellers. Home affordability, driven mostly by record low interest rates, is among the lowest it has ever been. According to the National Association of Realtors ®, and based on national averages, the payments on a home today represent 12.8% of the median household income. This is both a good sign for those looking to purchase a home, and for the economy overall as consumers are keeping more money in their pockets.

Choose your lender carefully. Look for financial stability and a reputation for customer satisfaction. Be sure to choose a company that gives helpful advice and that makes you feel comfortable. A lender that has the authority to approve and process your loan locally is preferable, since it will be easier for you to monitor the status of  your application and ask questions. It is also beneficial when the lender knows local market conditions. And be sure to ask family and friends for recommendations.

FHA makes it easier for consumers to obtain affordable home loans made by private lenders to eligible borrowers.  For loans that meet FHA’s guidelines, FHA offers lenders mortgage insurance to protect them against losses in the event that a borrower defaults on their loan.  This insurance reduces risks to lenders and allows them to offer mortgage financing to more potential home buyers.  Anyone can qualify for an FHA insured loan as long as they:  1)Meet FHA’s mandatory credit requirements, 2) Can afford the mortgage payments and mandatory up-front investment, 3) Plan to use mortgaged property as a primary residence.  The minimum down payment requirement for an FHA loan is 3.5% of the purchase price.  Besides a borrowers own funds, cash gifts may be acceptable, down payment assistance funds may also be available within certain geographical areas.

FHA is generally more flexible than conventional loans in its qualifying guidelines.  Among them are lower credit score requirements and debt to income ratios.   These more flexible guidelines have made FHA financing most popular for the first-time home buyer.

First-time homebuyers are currently making up 37% of the buying market and since 2006, FHA’s market share has increased from 3% to 30%.

Trulia’s Fall 2011 American Dream survey reports more than 1/2 of all renters who would like to buy a home say they are unable to because of down payment requirements.

62% of young adults (18-34 year olds), state that as a first time home buyer, lack of down payment has prohibited them from buying a home. Home buyers aged 35-54 are more concerned with qualifying for a loan because of having poor credit.

From saving enough for a down payment to qualifying for a mortgage and having a poor credit history, today’s aspiring home owners face many financial obstacles in order achieve their American Dream of home ownership,” says Jed Kolko, Trulia’s chief economist. “These obstacles keep some would-be home owners from taking advantage of low mortgage rates. On the other hand, they prevent some people from buying homes they can’t really afford. Government home ownership policies can target some of these obstacles to home ownership, but only stronger economic recovery will help households facing multiple obstacles become better able to buy homes.

A U.S. government report confirmed that initial claims for unemployment benefits declined to the lowest level since 2009, sending a ripple effect of positive growth to housing. The jobless rate fell to 8.3% from 8.5% the previous month. Senior economist at PNC Financial Services Group, Gus Faucher, said the data is further proof that the recovery solidified in late 2011.

Faucher added that the likelihood of and even stronger recovery is growing. An increase in job growth can contribute to a stronger rebound in housing. The ripple effect of positive job growth has a positive impact on many areas of the housing industry.

1. ASK SOMEONE YOU TRUST TO SUGGEST A LOCAL AGENT
Word of mouth can be a great way to find an insurance agent. Ask trusted friends and family members for referrals. However, make sure your pals recommend the agent for the right reasons. Many people prefer to have in-person appointments with their agent, and most agents prefer to know their clients personally. There is really no substitute to having a local agent who is an active member of your community.

2. INTERVIEW ALL PROSPECTIVE INSURANCE AGENTS
It is best to interview two or three agents. Ask them about specifics, as you would with an accountant or lawyer. Talk to them about your situation and see which ones give you the best advice. Once you get the expert on your team, you’re going to have someone who really knows what they’re doing. Your assets will be better protected as a result. There’s nothing worse than finding that a claim isn’t covered properly at the time of the claim.
Don’t be afraid to speak up and to ask about an agent’s experience, If necessary, ask to see a resume. Ask for references. A good agent should have several clients to provide enthusiastic recommendations.
The very nature of the agent-client relationship involves policyholders divulging “all sorts of personal information” to their agent. So, trust and professionalism are important. “If you feel that your agent is simply interested in selling you a policy, you should look elsewhere.”

3. FIND AN INSURANCE EXPERT
Look for agents who are true insurance experts. Such an expert can guide you through how to fill out a claim properly, so you get paid top dollar for your claim.An experienced agent will also be able to make your case to the claims department if you get into a dispute about a claims payment.
A good agent also will keep an eye on how your insurance requirements may shift over the years. Many people don’t realize that their insurance needs may change from year to year, and it is important for your agent to communicate the potential for these changes.

4. CHECK AN INSURANCE AGENT’S BACKGROUND
Make sure an agent’s licensing is up to date and meets state requirements. Also, check for any complaints against an agent. Generally speaking, state insurance offices should have a website where you can check the license status of your agent, and some will also allow you to check if there are any complains.
Remember, the goal is to find an agent who is properly licensed, has a good track record and puts your interests first.

With home prices falling, you are looking for a neighborhood that has a greater likelihood of holding its value with future appreciation. How do you know what neighborhood is not as stable and which will appreciate over time?

Bankrate.com says judging a neighborhood’s worth over the long haul comes down to two main factors: Jobs and access to amenities.

For example, Andrew Schiller, creator of NeighborhoodScout.com, says signs of long-term opportunities for jobs in an area would be low unemployment, high household income, large or prominent colleges and universities, and seats of federal or state government. He says the Bureau of Labor Statistics is a good resource, particularly its Local Area Unemployment Statistics map, which provides unemployment information by metro area and county, as well as its Current Employment Statistics, which tells you how many people are employed in different sectors of the economy in a certain area.

As for judging a neighborhood’s amenities that can generate long-term value, Schiller cites characteristics like a neighborhood that offers a variety of nearby retail stores, low crime rates, parks, distinctive architecture, and good public schools.

Thanks to continued declines in home prices and rock-bottom mortgage rates, the National Association of Home Builders/Wells Fargo Housing Opportunity Index hit a record level of affordability.According to the index, 75.9% of all new and existing homes sold during the three months ended Dec. 31 could have been comfortably purchased by families earning the national median income of $64,200.

That was the highest percentage recorded in the 20-year history of the index, and a sharp increase from just three months earlier when 72.9% of all homes sold were considered affordable.