The cost of waiting to accumulate a larger down payment

Should I Wait to Put Down a Bigger Down Payment?

 Wednesday August 26th, 2015  Down Payments, For Buyers, Interest Rates, Pricing

Some experts are advising that first time and move-up buyers wait until they save up 20% before they move forward with their decision to purchase a home. One of the main reasons they suggest waiting is that a buyer must purchase private mortgage insurance if they have less than the 20%. That increases the monthly payment the buyer will be responsible for.

In a recent article, Freddie Mac explained what this would mean for a $200,000 house:

However, we must look at other aspects of the purchase to see if it truly makes sense to wait.

Are you actually saving money by waiting?

CoreLogic has recently projected that home values will increase by 4.3% over the next 12 months. Let’s compare the extra cost of PMI against the projected appreciation:

If you decide to wait until you have saved up a 20% down payment, the money you would have saved by avoiding the PMI payment could be surpassed by the additional price you eventually pay for the home. Prices are expected to increase by more than 3% each of the next five years.

Saving will also be more difficult if you are renting, as rents are also projected to increase over the next several years. Zillow Chief Economist Dr. Svenja Gudell explained in a recent report:

"Our research found that unaffordable rents are making it hard for people to save for a down payment ... There are good reasons to rent temporarily – when you move to a new city, for example – but from an affordability perspective, rents are crazy right now. If you can possibly come up with a down payment, then it's a good time to buy a home and start putting your money toward a mortgage."

Laura Kusisto of the Wall Street Journal recently agreed with Dr. Gudell:

“For some renters there may be a way out: Buy a house. Mortgages remain very affordable.”

Mortgage rates are expected to rise…

Freddie Mac is projecting that mortgage interest rates will increase by almost a full percentage point over the next 12 months. That will also impact your mortgage payment if you wait.

Bottom Line

Sit with a real restate or mortgage professional to truly understand whether you should buy now or wait until you save the 20%.

When you would like to evaluate how this applies to your unique situation, call, text or email

Actual Down Payments

64.2% of Millennials Put Down Less than 20%

 August 20, 2015  Down Payments, First Time Home Buyers, For Buyers

Digital Risk recently polled Millennials about the housing market. Among their findings was the fact that nearly two-thirds of the generation who have recently purchased a home, have done so with less than 20% down; with 36% putting down less than 5%!

Here is a graph detailing the results:

This means that more and more American’s between the ages of 18 and 34 stopped paying their landlord’s mortgage and started building their own family’s wealth.

Millennials aren’t the only ones taking advantage of lower down payments.

The Federal Reserve Bank of New York found that if the down payment required to purchase a home went from 20% to 5%, a renter’s Willingness To Pay (WTP) increased by 40%.

The problem is that thirty-six percent of Americans still think a 20% down payment is alwaysrequired when buying a home. Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

Bottom Line

If you are one of the many renters now realizing that the home of your dreams is obtainable, let's get together and discuss your options.

Just call, text or email

Don't Over Think Get the Facts

Are you in this group??

Don't assume!!! I can put you in touch with real live lenders who can give you answers that can't be found by believing what you see in the media.

WHAT NOT TO BELIEVE ABOUT GETTING A MORTGAGE

The biggest reason renters say they are not buying a home:

Here is the ridiculous amounts they think they need:

Thus the misconception leads to:

 Please before you make a decision based upon these nonexistent facts, get in touch so we can discuss the reality of needing only 5% down to 0% down payment.

Don't let the media hype stop you from buying your Dream Home - Get the FACTS

We have recently reported on the misconception that many buyers have regarding the down payment necessary to purchase a home. Multiple studies reveal that 40-50% of Americans believe you need between 15-20% of a down payment to be eligible to purchase a home.

This misconception came about as the government just last year debated new guidelines for residential mortgages because of the housing collapse in 2007. Some were arguing that there should be a minimum of 20% or even 30% down payment on all mortgage loans. However, those standards were never implemented.

To counter this misunderstanding, Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management, in a recent Executive Perspectivesexplained that a person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent”.

3% Down Payments Available Soon?

Just last week, Federal Housing Finance Agency Director Mel Watt announced that mortgages requiring only a three percent down payment may soon be available:

“To increase access for creditworthy but lower-wealth borrowers, FHFA is also working with the Enterprises to develop sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent. Through these revised guidelines, we believe that the Enterprises will be able to responsibly serve a targeted segment of creditworthy borrowers with lower-down payment mortgages by taking into account “compensating factors.”

Bottom Line

If you are saving for either your first home or that perfect move-up dream house, make sure you know all your options. You may be pleasantly surprised.

The Truth About Buying a Home: You DON'T Need 20% Down

In a recent survey, How America Views Homeownership, it was revealed that 68% of Americans feel that now is a good time to buy a home and 95%said they want to own a home if they don’t already.

Franklin Codel, head of Wells Fargo home mortgageproduction, explains:

“Although the home buying process has changed in many ways in recent years, our survey found Americans still view homeownership as an achievement to be proud of and many believe that now is a good time to buy a home.”

Confusion Creates Paralysis

However, the survey also reported that many are afraid to purchase a home because of uncertainty about “qualifying for a mortgage or navigating the home buying process”. Though 74% said they “know and understand” the financial process involved in buying a home, they also gave answers that suggest otherwise. For example:

• 30% of respondents believe that only individuals with high incomes can obtain a mortgage
• 64% of respondents believe they must have a “very good” credit score to buy a home
• 44% believe that a 20% down payment is required

In actuality many of these beliefs are unfounded. Let’s look at the question of down payment:

Freddie Mac, in a recent blog post addressing the issue, confirmed that there is misinformation regarding the amount necessary when determining the down payment for a home purchase:

“Did you know 40 percent of today's homebuyers using mortgage financing are making down payments that are less than 10 percent? And how about this: since 2010, the number of people putting down less than 10 percent for conventional loans has grown three fold.  So, not only are low down payment options real, they represent a significant portion of today's purchases.”

In a separate Executive Perspectives, Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management explained further:

• A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
• Qualified borrowers can further reduce the down payment coming out of their own pockets to 3 percent by lining up gifts from family, grants or loans from non-profits or public agencies.

Education is the Key

Boyle talked about the importance of educating potential buyers:

“Letting more consumers know how down payments are determined could bring more qualified borrowers off the sidelines. Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 or 10 percent.”

Codel agreed:

“It is important for prospective homebuyers to feel empowered to ask lenders and real estate agents questions about available options, such as down payment assistance or FHA loan programs or VA loans for veterans.”

Bottom Line

If you are saving for either your first home or that perfect move-up dream house, make sure you know all your options. You may be pleasantly surprised.

You Don't Need That Much of a Down Payment

The media has made it sound almost impossible to get a loan. I'll be glad to explain how easy it is to get your mortgage without  a huge down payment.


You Don't Need That Much of a Down Payment