Category Archives: Buyers and Sellers
One of the biggest misconceptions of home buying? The 20% down payment. Here’s how to buy with a lot less down.
Buying your first home conjures up all kinds of warm and fuzzy emotions: pride, joy, contentment. But before you get to the good stuff, you’ve got to cobble together a down payment, a daunting sum if you follow the textbook advice to squirrel away 20% of a home’s cost.
Here are five creative ways to build your down-payment nest egg faster than you may have ever imagined.
1. Crowdsource Your Dream Home
You may have heard of people using sites like Kickstarter to fund creative projects like short films and concert tours. Well, who says you can’t crowdsource your first home? Forget the traditional registry, the fine china, and the 16-speed blender. Use sites like Feather the Nest and Hatch My House to raise your down payment. Hatch My House says it’s helped Americans raise more than $2 million for down payments.
2. Ask the Seller to Help (Really!)
When sellers want to a get a deal done quickly, they might be willing to assist buyers with the closing costs. Fewer closing costs = more money you can apply toward your deposit.
“They’re called seller concessions,” says Ray Rodriguez, regional mortgage sales manager for the New York metro area at TD Bank. Talk with your real estate agent. She might help you negotiate for something like 2% of the overall sales price in concessions to help with the closing costs.
There are limits on concessions depending on the type of mortgage you get. For FHA mortgages, the cap is 6% of the sale price. For Fannie Mae-guaranteed loans, the caps vary between 3% and 9%, depending on the ratio between how much you put down and the amount you finance. Individual banks have varying caps on concessions.
No matter where they net out, concessions must be part of the purchase contract.
3. Look into Government Options
The U.S. Department of Housing and Urban Development, or HUD, offers a number of homeownership programs, including assistance with down payment and closing costs. These are typically available for people who meet particular income or location requirements. HUD has a list of links by state that direct you to the appropriate page for information about your state.
HUD offers help based on profession as well. If you’re a law enforcement officer, firefighter, teacher, or EMT, you may be eligible under its Good Neighbor Next Door Sales Program for a 50% discount on a house’s HUD-appraised value in “revitalization areas.” Those areas are designated by Congress for homeownership opportunities. And if you qualify for an FHA-insured mortgage under this program, the down payment is only $100; you can even finance the closing costs.
For veterans, the VA will guarantee part of a home loan through commercial lenders. Often, there’s no down payment or private mortgage insurance required, and the program helps borrowers secure a competitive interest rate.
Some cities also offer homeownership help. “The city of Hartford has the HouseHartford Program that gives down payment assistance and closing cost assistance,” says Matthew Carbray, a certified financial planner with Ridgeline Financial Partners and Carbray Staunton Financial Planners in Avon, Conn. The program partners with lenders, real estate attorneys, and homebuyer counseling agencies and has helped 1,200 low-income families.
4. Check with Your Employer
Employer Assisted Housing (EAH) programs help connect low- to moderate-income workers with down payment assistance through their employer. In Pennsylvania, if you work for a participating EAH employer, you can apply for a loan of up to $8,000 for down payment and closing cost assistance. The loan is interest-free and borrowers have 10 years to pay it back.
Washington University in St. Louis offers forgivable loans to qualified employees who want to purchase housing in specific city neighborhoods. University employees receive the lesser of 5% of the purchase price or $6,000 toward down payment or closing costs.
Ask the human resources or benefits personnel at your employer if the company is part of an EAH program.
5. Take Advantage of Special Lender Programs
Finally, many lenders offer programs to help people buy a home with a small down payment. “I would say that the biggest misconception [of homebuying] is that you need 20% for the down payment of a house,” says Rodriguez. “There are a lot of programs out there that need a total of 3% or 3.5% down.”
FHA mortgages, for example, can require as little as 3.5%. But bear in mind that there are both upfront and monthly mortgage insurance payments. “The mortgage insurance could add another $300 to your monthly mortgage payment,” Rodriguez says.
Some lender programs go even further. TD Bank, for example, offers a 3% down payment with no mortgage insurance program, and other banks may have similar offerings. “Check with your regional bank,” Rodriguez says. “Maybe they have their own first-time buyer program.”
Not so daunting after all, is it? There’s actually a lot of help available to many first-time buyers who want to achieve their homeownership dreams. All you need to do is a little research — and start peeking at those home listings!
Back to school isn’t the most exciting thing happening in August. It pales in comparison to another, much more important event: the release of the new IKEA catalogue. Praise, Sweden, it’s here. And that means it’s time for us scour the book for all the things we’ll need to go buy in the coming weeks.
Here is our Top eight:
1. The utilitarian Pinnig has a coat rack up top and shoe storage down below, and will fit right in with industrial décor. Throw a cushion over that bench and you also have a comfy place to sit with this $89 piece.
2. We love the simple shape of the $75 ODGER chair, and the fact that it “assembles without tools and works for dining room, workspace, and more,” said Curbed, makes it even better. If you’re not a fan of the light brown, it will also come in creamy white and dark blue.
3. IKEA is down with the brass trend that’s going on in interior design, and we’re all about their new TILLAGD Flatware. Priced at $59.99 for a 20-piece set, it also comes in black. Apartment Therapy calls the sets an “on-trend bargain yet timeless enough to purchase for the long haul. Get ready for your glammiest dinner or holiday parties ever with flatware in simple shapes done up in luxe, of-the-moment finishes.”
apartmenttherapy.com4. In a kid’s room, a laundry room, a craft space, a dorm room, a kitchen – there isn’t a space we can’t picture using the MYRHEDEN Frame. At $14.99, it’s so affordable you can buy one for every room. With a clip in every part of the grid and hooks at the bottom, just imagine what you’ll be able to show off.
Ikea5. New hardware is among the easiest and most impactful changes you can make to a piece of furniture, and these OSTERNAS Leather Handles and Pulls ($12.99 for two handles, $9.99 for two pulls) will certainly make an impression.
Ikea7. Personally, we’re fans of anything that has a tray on top. This little $39 YPPERLIG Coffee Table is DEFINITELY going to keep the dog from knocking over the ever-present Diet Coke (again).
decoist.com8. If you’re OVER your quilted headboard, might we suggest the GJÖRA Bed Frame. The natural wood color is right on trend, and, at $279, it’s an inexpensive way to update your lair.
The average homeowner is spending more money on a greater number of home improvement projects, according to HomeAdvisor’s 2017 True Cost Survey, a study of 14 million service requests received between July 2016–17. However, the projects vary by generation, income, and geography, the study finds. Here are the top five most popular home improvement projects by generation.
- Install outdoor play equipment
- Install childproofing
- Install backyard landscaping
- Update sprinkler system for lawn and garden
- Install front yard landscaping
- Repair outdoor play equipment
- Install outdoor play equipment
- Add or remove holiday lighting
- Build or install vinyl-lined swimming pool
- Build or install an above-ground swimming pool
These homeowners are the biggest spenders on remodeling projects, according to the study. They pay a lot for home maintenance to keep their property values up—particularly if they’re looking to sell and use the proceeds in retirement.
- Install or repair gutters
- Repair shed, barn, or playhouse
- Repair gazebo or freestanding porch
- Asphalt sealing
- Repair exterior trim
“Boomers are indulging in luxury purchases, large discretionary remodels, kitchens, bathrooms, stonework, remodeling swimming pools, hiring designers to do professional landscaping jobs,” says Brad Hunter, HomeAdvisor’s chief economist.
Source: “Home Improvement Is Hot Right Now, But Who’s Doing What?” realtor.com® (Aug. 28, 2017)
When a homeowner decides to sell their house, they obviously want the best possible price for it with the least amount of hassles along the way. However, for the vast majority of sellers, the most important result is actually getting their homes sold.
In order to accomplish all three goals, a seller should realize the importance of using a real estate professional. We realize that technology has changed the purchaser’s behavior during the home buying process. According to the National Association of Realtors’ 2016 Profile of Home Buyers & Sellers, the first step that “…44% of recent buyers took in the home buying process was to look online at properties for sale.”
However, the report also revealed that 96% of buyers who used the internet when searching for homes purchased their homes through either a real estate agent/broker or from a builder or builder’s agent. Only 2% purchased their homes directly from a seller whom the buyer didn’t know.
Buyers search for a home online but then depend on an agent to find the home they will buy (50%), to negotiate the terms of the sale (47%) & price (36%), or to help understand the process (61%).
The plethora of information now available has resulted in an increase in the percentage of buyers who reach out to real estate professionals to “connect the dots.” This is obvious, as the percentage of overall buyers who have used agents to buy their homes has steadily increased from 69% in 2001.
What we’d like you to take away –
If you are thinking of selling your home, don’t underestimate the role a real estate professional can play in the process.
In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their homes on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.
Here are the top five reasons:
1. Exposure to Prospective Buyers
Recent studies have shown that 94% of buyers search online for a home. That is in comparison to only 16% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?
2. Results Come from the Internet
Where did buyers find the homes they actually purchased?
- 51% on the internet
- 34% from a Real Estate Agent
- 8% from a yard sign
- 1% from newspapers
The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.
3. There Are Too Many People to Negotiate With
Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale by Owner:
- The buyer who wants the best deal possible
- The buyer’s agent who solely represents the best interest of the buyer
- The buyer’s attorney (in some parts of the country)
- The home inspection companies, which work for the buyer and will almost always find some problems with the house
- The appraiser if there is a question of value
4. FSBOing Has Become More And More Difficult
The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.
The 8% share represents the lowest recorded figure since NAR began collecting data in 1981.
5. You Net More Money When Using an Agent
Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.
Studies have shown that the typical house sold by the homeowner sells for $185,000, while the typical house sold by an agent sells for $245,000. This doesn’t mean that an agent can get $60,000 more for your home, as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.
What does this mean to you?
Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.
Welcome to 16201 Ginger Avenue in Mead. This home features 3 bedrooms and 3 baths in Mead’s popular neighborhood of Western Meadows.
You will agree this home is spotless and shows as such with it’s clean and tidy set up.
On the main level you will find wood flooring, vaulted ceiling and an oversized master bedroom suite with large walk-in closet. The laundry room, complete with folding table, is also located on this level.
The lower level features a generous family room that walks out to a large patio. Enjoy the beautiful Colorado mountain views that we love so much, from the patio.
Additional features include a spacious 3-car garage and an unfinished basement ready for you to put your own touches on.
This home has fantastic curb appeal, beautifully manicured landscaping and a private fire-pit area – perfect for year around use!
A SHARED ARTICLE WRITTEN BY MICHELE LERNER
In an environment where lenders are highly regulated and risk-averse, borrowers are rightfully a little nervous when they apply for a mortgage. But with the right preparation, qualifying for a home loan can be a rewarding experience in your journey toward homeownership.
“In a lot of ways, lenders have gone back to the basics, looking at fundamental personal finance criteria to decide who qualifies for a loan,” says Rick Sharga, chief marketing officer of Ten-X, an online real estate marketplace in Irvine, California.
At the same time, Sharga says lenders have been more risk-averse than ever since the housing bust.
A.W. Pickel, III, Midwest division president of AmCap Mortgage in Kansas City, Missouri, recommends finding a loan officer you can trust and sticking with that person during your entire homebuying process.
“A good loan officer is like a pilot flying you and your loan from Kansas City to Hawaii,” Pickel says. “There are several ways to get there and several things that can happen on the way. A good loan officer has seen the turbulence and knows where the smooth air is.”
7 steps toward a loan approval
The back-to-basics approach by lenders means that borrowers can take steps that increase their chances of a mortgage approval.
Improving your credit, reducing your debt and gathering your documentation are among the many things you can do long before a loan application to increase the likelihood of getting a “yes” from a lender.
1. Maintain a high credit score. The average FICO score for an approved borrower is around 720 for a conventional loan and close to 700 for an FHA-insured loan, says Sharga. He says borrowers should find out their FICO score before applying for a loan, make sure their credit report is correct and take steps to improve their score if necessary. Pickel says he recently reviewed a loan file with a high debt-to-income ratio of 49 percent but a credit score over 800, which resulted in a loan approval.
Keep a vigilant eye on your credit profile while you wait for your loan to close, too.
“Once the application process has begun, borrowers shouldn’t do anything that might negatively impact their credit rating — no new accounts, no late or missed payments,” says Sharga.
2. Save for a bigger down payment. One way to minimize risk for a lender is to make a higher-than-minimum down payment. “The average down payment today is around 10 percent; historically the standard has been 20 percent,” says Sharga. “Anything above that lowers the loan-to-value ratio, which is viewed positively.”
3. Choose the right loan. If you have less money for a down payment but have good credit, you may qualify for a conventional loan with private mortgage insurance and a down payment requirement of 3 to 5 percent.
You may want to look for a lender who issues FHA loans, which are often available to borrowers with less cash or a lower credit score and require a down payment of 3.5 percent. Keep in mind these loans require a monthly mortgage insurance payment in addition to principal and interest, Sharga says.
4. Manage your debt. Lenders are reluctant to issue loans that fall outside qualified mortgage rules established by the Consumer Finance Protection Bureau (CFPB), says Sharga. These loans have a strict cap of a 43 percent debt-to-income ratio, which is the percentage of your gross monthly income that goes toward the minimum payment on all your debt, including your mortgage.
Paying off credit card balances or at least reducing debt before applying for a home loan is helpful.
5. Buy within your means. “Be realistic with your monthly income,” Pickel says. “Buy a house with a monthly payment you can afford. Buying a house that needs the income from two or three future raises will only cause stress.”
It matters that you can afford your payments and have remaining income after those payments are made, he says.
6. Demonstrate stability. Lenders look for signs of personal and financial stability, such as whether you’ve saved three to six months’ worth of expenses in the bank, whether you have a steady employment record and how often you’ve moved over the past few years, Sharga says. Your good credit score and a pattern of saving money are both indicators of financial strength.
7. Respond fast to lender requests. The CFPB’s ability-to-repay rule requires lenders to verify whether a borrower has the means to handle loan payments, says Sharga. This requires you to have all your financial records in order, including pay stubs, bank records, tax returns and more. Sharga says incomplete documentation is a common reason for loans being declined.
“If the loan officer asks for it, then bring it,” says Pickel. “Sometimes people don’t want to say they can’t find something or they don’t want to look for it, but it really helps to have all the information that the loan officer requests. This will help expedite the process.”
While it should go without saying, honesty is an essential component of a loan approval.
“No one likes surprises, especially loan underwriters,” says Pickel. “Tell the truth, even if it hurts. It will help even if it means that you don’t qualify today.”
Michele Lerner has been writing about real estate, personal finance and business topics for more than two decades and contributes articles about mortgages at MoneyGeek.com. Her work has appeared in The Washington Post and online at Fox Business News, Forbes BrandVoices, NewHomeSource.com, MSN.com, and Yahoo.com.
If you are renting now you are very familiar with the high cost of rental rates in this sizzling real estate market. This article will help with laying the ground work for qualifying for a mortgage to purchasing your own home plus the mortgage payment will most likely be less than what you are paying in rent right now.
Nearly 4.5 million borrowers are eligible to refinance and could lock in savings on their monthly mortgage payments but have not taken advantage, according to a new report from Black Knight Financial Services.
The average borrower stands to save $260 a month. Nearly 700,000 borrowers could save $400 or more per month, the report shows.
“The recent pause in the upward movement of interest rates continues to encourage late-to-the-game borrowers to refinance,” says Lynn Fisher, the Mortgage Banker Association’s vice president of research and economics.
But many owners are not refinancing, despite the potential savings.
“Our data doesn’t tell us about motivation,” says Ben Graboske, senior vice president of data and analytics at Black Knight Financial Services. “It leaves us to surmise that the reason is apathy, lack of awareness, and education.”
Some homeowners may still be underwater on their home loans, owing more than what the home is currently worth. Other owners may have a low credit score that is blocking them from taking advantage of lower rates.
Still, owners likely will have more time to take advantage. “I don’t think this will be the last opportunity [to refinance into a low rate], but I don’t have a crystal ball,” says Graboske. “There are enough pressures in the market—lenders getting more efficient—that we’re going to have competitive rates around for awhile.”
Source: “Reason to Refinance: 4 Million Homeowners Are Leaving $1 Billion on the Table,” CNBC (June 22, 2017)
Whether you are a first time home buyer or a seasoned homeowner these suggestions make sense and we can all hear this information from time to time.