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5 Surprising (and Useful!) Ways to Save for a Down Payment

One of the biggest misconceptions of home buying? The 20% down payment. Here’s how to buy with a lot less down.

First-Time-Home-Buyers

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.

home saving

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.

mortgage tiles

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!

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Selling One, Buying Another … Simultaneously?

Selling One, Buying Another

In a perfect world, you sell your old home and buy the new one on the same day. Given that things rarely turn out perfectly, here are some things to keep in mind as you negotiate the sale of one house with the purchase of another. 
 
Time it right
Fall and spring are the best times for homes to move and you want to consider the season of the year when buying and selling. And if the closing dates aren’t going to coincide, a gap – rather than two mortgages – is the better. It’s easier and usually cheaper to find temporary housing than juggle two mortgages.


Selling First

  • Selling your home before buying a new one minimizes financial hazards. Even if you have to find temporary housing, it’s generally cheaper than two mortgages.
  • Get a good market analysis first thing off the bat. That way you’ll have a good idea how the sale of your home will effect your purchasing power on the new one.  This will help keep you from over extending your mortgage abilities.
  • Get pre-approved on a loan for the new home.
  • Until most of your contingencies have been met, wait to put an offer on a new house. You don’t want to be left holding the bag, or in this case, the house.
  • If you’re ready to accept an offer on your home, but haven’t found the right new home, negotiate a long escrow or a sale/lease back. This will give you more time to look for the new home. Otherwise, look for temporary housing.

Buying First

It happens. You’re only thinking of buying, and suddenly the right home shows up. Now you have to sell your old home quickly. Here are some tips on making things work in your favor:

  • Negotiating a long escrow on this side of the sale works, too. You can also make the purchase contingent on your house selling. This will work better in a slow market, but it’s worth a try in any market. You never know what may also work best for the seller of your new home.
  • Try and schedule the closing date of your current home prior to the closing on your new home. Temporary housing is generally a better situation than two mortgages.
  • Take a close look at what price you’re going to ask for your home. Make sure it’s realistic in the current market.
  • When you get an acceptable offer, check the buyer’s credit history. You don’t want any surprises that are going to delay things. If you’ve closed on the new home, but haven’t sold the old one, consider renting it out, or taking it off the market until the next season (or until the market improves).

Same Market or Across Country

Generally, if you’re buying and selling in the same market, you can negotiate closing dates to work for you. But when you’re dealing with a cross country move, it’s a lot harder. A real estate professional really comes in handy at this point. Legal documents can be faxed or sent via overnight courier and your focus won’t be stretched to the limit. You may end up renting one home or the other, or have to consider a bridge loan. But with someone local in the market on your side, it will hopefully be less stressful.

Show Me the Money

Make sure you have a tight hold on, and a clear understanding of, your financial situation. Cash reserves are always helpful, but never more so than during the purchase of a home. Two to three months is the recommended reserve, but if you don’t have it, this is where the bridge loan comes in handy. Some lenders are more inclined to make a loan if it’s for the purchase of a home. If you’re a smart shopper/seller, you’ll accept an offer from someone who’s flexible about move-in dates. It can save you money in the long run. Too many moves with storage costs can quickly eat up any profit you may have made in the transaction.

I’m Your Expert

Consider me your all-things-real-estate expert. Together I’m confident we can meet your real estate goals.

FHA lowers mortgage insurance

Awesome news from a mortgage lender I use a lot about FHA costs…

“YAHOO, great news! Most people who are currently in an FHA loan have not been able to take advantage of the low rates because FHA had a such a high monthly mortgage insurance premium that it took the value away. FHA finally got it together and is lowering the upfront mortgage insurance AND the monthly mortgage insurance! If I you’ve been told you that it just didn’t make sense before, well it probably does now. To get the process rolling quickly you can apply online to www.firstcal.net/eusea. The new amounts will start AFTER April 9th, but let’s get it ready!!”

Catherine Eusea
Area Sales Manager
ceusea@firstcal.net

Office: 970-372-6939
Cell:
 720.300.6777
Fax: 855.502.6873
NMLS#: 237244

Home Sales on the Rise: Ready for Spring Buying Season?

Existing-home sales rose 4.3 percent in January to a seasonally adjusted annual rate of 4.57 million, marking the third gain for home sales in the last four months, the National Association of REALTORS® reports.

“The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” NAR’s Chief Economist Lawrence Yun says.

While sales ticked up, inventories of for-sale homes also continued to show improvement, NAR reported. At the end of January, total housing inventory fell 0.4 percent to 2.31 million existing homes for sale, which represents a 6.1-month supply at the current sales pace.

Unsold listed inventory has steadily dropped since reaching a peak of 4.04 million in July 2007. It now is 20.6 percent below where it was a year ago, NAR reports.

English: Mortgage rates historical trends

Image via Wikipedia

Housing Affordability Improves

As home prices have fallen and mortgage rates at all-time record lows, housing affordability is at some of its highest levels on record.

“Word has been spreading about the record high housing affordability conditions and our members are reporting an increase in foot traffic compared with a year ago,” says NAR President Moe Veissi. “With other favorable market factors, these are hopeful indicators leading into the spring home-buying season. We’re cautiously optimistic that an uptrend will continue this year.”

The national median existing-home price for all housing types in January was $154,700, which is down 2 percent year-over-year.

Distressed sales, which tend to sell at steep discounts, continue to hamper home prices nationwide. Foreclosures and short sales accounted for 35 percent of all January home sales, which is up slightly from 32 percent in December.

Still, “home buyers over the past three years have had some of the lowest default rates in history,” Yun said.  “Entering the market at a low point and buying at discounted prices have greatly helped in that success.”

Contract Delays, Cancellations Remain High

Twenty-one percent of NAR members in January reported delays in contracts, and 33 percent said contracts fell through, according to NAR. The number of contract cancellations remains mostly unchanged from December.

The increase in the past year of contract cancellations or delays has been blamed on more lenders declining mortgage applications from stricter underwriting standards and low appraisals coming in under the agreed upon contract price.

Source: National Association of REALTORS®

Will the Real Estate Market Heat Up This Spring?

Real EstateI read this article today and thought it worth the share… I am seeing signs of a local recovery everywhere I look. All good news here!

—–

Daily Real Estate News | Monday, February 06, 2012

The spring season usually brings an increase in buying and selling to the real estate market, and housing experts are mostly optimistic that this spring will be even better than recent years.

Some signs are already there: Housing inventories are declining, housing affordability is at record highs, mortgage rates are at all-time lows, and the job market is improving.

Existing-home sales have been edging up in recent months, and for-sale housing inventories were at nearly 2.4 million units in December, reaching its lowest point since 2005, according to National Association of REALTORS® data.

NAR’s Chief Economist Lawrence Yun says home prices are beginning to stabilize in many markets.

Also, NAR’s Housing Affordability Index is at its highest level since the 1970s, which indicates that for the average family housing is very affordable.

However, threats to a housing recovery still loom this spring. Strict mortgage lending is keeping some buyers on the sidelines, and foreclosures continue to put downward pressure on overall home prices in many markets.

“The signals are a little hard to extrapolate, but ultimately by the end of this year we should see the housing market on more solid footing,” says Celia Chen, senior housing economist with Moody’s Analytics. “So an improvement but off of very, very weak activity.”

Source: “Real Estate: A Buy or Bust This Spring Selling Season?” Investor’s Business Daily (Feb. 2, 2012)

—–

Hope you enjoyed as much as I did.

Thanks,

Garry

Logo of the National Association of Realtors.

Max Mortgage Calculator

Maximum Mortgage

What is your maximum mortgage? That largely depends on your income and current monthly debt payments. This calculator collects these important variables and determines your maximum monthly housing payment and the resulting mortgage amount.

Visit our maximum mortgage calculator to enter in your own variables and see your own personal situation.

http://www.legacyrealtor.net/MaxMortgageCalc

Garry Callis

303-257-4725

Selling One Home, Buying Another?

English: Moving Company employees load a movin...

Image via Wikipedia

Selling One Home, Buying Another

In a perfect world, you sell your old home and buy the new one on the same day. Given that things rarely turn out perfectly, here are some things to keep in mind as you negotiate the sale of one house with the purchase of another.

Time it right

Fall and spring are the best times for homes to move and you want to consider the season of the year when buying and selling. And if the closing dates aren’t going to coincide, a gap – rather than two mortgages – is the better. It’s easier and usually cheaper to find temporary housing than juggle two mortgages.

Selling First

  • Selling your home before buying a new one minimizes financial hazards. Even if you have to find temporary housing, it’s generally cheaper than two mortgages.
  • Get an appraisal first thing off the bat. That way you’ll have a good idea how the sale of your home will effect your purchasing power on the new one.  This will help keep you from over extending your mortgage abilities.
  • Get pre-approved on a loan for the new home.
  • Until most of your contingencies have been met, wait to put an offer on a new house. You don’t want to be left holding the bag, or in this case, the house.
  • If you’re ready to accept an offer on your home, but haven’t found the right new home, negotiate a long escrow or a sale/lease back. This will give you more time to look for the new home. Otherwise, look for temporary housing.

Buying First
It happens. You’re only thinking of buying, and suddenly the right home shows up. Now you have to sell your old home quickly. Here are some tips on making things work in your favor:

  • Negotiating a long escrow on this side of the sale works, too. You can also make the purchase contingent on your house selling. This will work better in a slow market, but it’s worth a try in any market. You never know what may also work best for the seller of your new home.
  • Try and schedule the closing date of your current home prior to the closing on your new home. Temporary housing is generally a better situation than two mortgages.
  • Take a close look at what price you’re going to ask for your home. Make sure it’s realistic in the current market.
  • When you get an acceptable offer, check the buyer’s credit history. You don’t want any surprises that are going to delay things. If you’ve closed on the new home, but haven’t sold the old one, consider renting it out, or taking it off the market until the next season (or until the market improves).

Same Market or Across Country

Generally, if you’re buying and selling in the same market, you can negotiate closing dates to work for you. But when you’re dealing with a cross country move, it’s a lot harder. A real estate professional really comes in handy at this point. Legal documents can be faxed or sent via overnight courier and your focus won’t be stretched to the limit. You may end up renting one home or the other, or have to consider a bridge loan. But with someone local in the market on your side, it will hopefully be less stressful.

Show Me the Money

Make sure you have a tight hold on, and a clear understanding of, your financial situation. Cash reserves are always helpful, but never more so than during the purchase of a home. Two to three months is the recommended reserve, but if you don’t have it, this is where the bridge loan comes in handy. Some lenders are more inclined to make a loan if it’s for the purchase of a home. If you’re a smart shopper/seller, you’ll accept an offer from someone who’s flexible about move-in dates. It can save you money in the long run. Too many moves with storage costs can quickly eat up any profit you may have made in the transaction.

Before You Look at Your First House

Before You Look at Your First House

Experienced home buyers know that one of the first-steps in beginning a successful search for a new house is taking a hard, objective look at finances. Determining how much money you can dedicate to the purchase of your new house affects almost every aspect of buying a new home – including how we write the offer, which mortgage programsyou will qualify for, shopping for the best mortgage loan and which homes are truly in your price range.

Here are the questions that each home buyer should ask:

  • How much cash is available for a down payment?The amount you have available for a down payment will affect what types of loans for which you can qualify. Learn more.
  • Am I ready to write a check for the earnest money? Earnest money is a cash deposit made to a home seller to secure an offer to buy the property. This amount can be forfeited if the buyer decides to withdraw his offer.
  • How much additional cash will be available to pay for closing costs? There are certain standard costs associated with closing the sale of a house. Some fees are split between the buyer and the seller, as spelled out in the sales contract. Learn more.
  • What is the maximum monthly mortgage payment that I can afford? Most lenders will use the 28/36 rule to determine the maximum mortgage payment you can afford.

The 28/36 Rule
No more than 28% of your gross income can be applied to your mortgage, real estate taxes and insurance. And no more than 36% of your gross income can be applied to your mortgage expenses plus your regular debt expenses (car payments, credit cards, other loans, etc.).

Any Questions? I am always available to talk…

Garry Callis 

303-257-4725

What’s in store for the Housing Market in 2012?

With so many predictions out there, it’s hard to decipher the real from the hype, but take a look at what US News Weekly has to say – pretty interesting article.

I personally have experienced extremely low inventory levels in the past few weeks. What’s that mean? It means there are NOT ENOUGH homes for sale. I know, it may sound like the opposite of what your used to hearing, but that’s why it’s so important to stay on top of the absolutely latest information.

This article ran in US News Weekly.

 

What’s in Store for the Housing Market in 2012?

Tanking home prices are likely to level off

By MEG HANDLEY

Is 2012 the year the housing market turns around? Of course, no one can say for sure, but plenty of economists say signals are pointing in the right direction.

“It has become increasingly apparent that the pieces for a housing rebound next year are beginning to fall into place,” wrote Barclays Capital analyst Stephen Kim in a recent report.

[Still, obstacles remain for the housing market. Here’s look at what to expect in 2012:

Home prices bottom out. Nationally, home prices have plummeted almost 24 percent off of their peak, and most economists expect prices to continue to decline as much as 4 or 5 percent before leveling out in late 2012.

While experts don’t expect a rapid conclusion to the saga of ever-declining home prices, “the trend of eroding expectations for the housing market recovery has come to a halt,” said Terry Loebs, founder of Pulsenomics, in a release.

Nationally, prices could start seeing a modest bump in 2013, but some markets are already recovering. “[T]hese national indexes mask the sizable variation in local house-price performance,” Frank Nothaft, chief economist at Freddie Mac, wrote in a recent report. “Some markets have appreciated over the past year and are likely to gain further in 2012, while those markets with higher vacancy rates and relatively large distressed sales will continue to see downward price pressure over the next year.”

Low mortgage rates. Rock-bottom low mortgage rates are likely here to stay, at least through the first half of 2012, in large part due to the Fed’s commitment to keep interest rates low to spur borrowing.

All bets are off, though, if politicians come to a decision on the qualified residential mortgage measure included in the Dodd-Frank financial reform act. “One of the most substantial things that will impact the market will be the definition of the qualified residential mortgage,” says Cameron Findlay, chief economist at LendingTree. “That has the potential of entirely changing the way mortgage rates are offered to consumers and it has the risk of raising rates by about 1.25 percent.”

Rising rents. The foreclosure crisis has converted millions of previous homeowners to renters and many would-be homebuyers have continued to stay on the sidelines and rent, waiting for prices to “hit bottom” before jumping into the housing market fray.

With more demand comes rising rents, a trend already being seen in many metro areas across the nation. Ultimately that can be a good thing for the housing market, since it generally tips more people into buying homes.

[“Rising rents have traditionally been a good factor for home sales,” says Lawrence Yun, chief economist at the National Association of Realtors.

Also, with rental demand heightened, real estate investors’ ears have perked up. With prices in many metro areas at historic lows, investors are taking advantage and scooping up properties to convert into rentals, Yun says.

Home sales pick up. The end sum of all these factors is an expected uptick in existing and new home sales next year. “There are so many improving factors that support home sales that we are calling for about a 5 percent increase in [existing] home sales in 2012 over 2011,” Yun says.

New home sales should also see an even bigger bump between 10 and 15 percent, Yun says, because the inventory of new constructions is so low. “The builders will be ramping up production,” he says.