The last month has been a refreshing mix of a market that’s moving at a decent speed while allowing clients to have some time to make critical decisions.
Is the market slowing down? Yes. Is it a good time to be a buyer? Yes. Is the world as we know it crumbling around us? No.
Saving for a down payment is often the biggest hurdle for a first-time home buyer as median incomes, rents, and home prices all vary depending on where you live.
There is a common misconception among home buyers that a 20% down payment is required, and it is this limiting belief that often adds months, and sometimes even years, to the home-buying process.
So, if you can purchase a home with less than a 20% down payment… why aren’t more people doing just that?
One Possible Answer: Private Mortgage Insurance (PMI)
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. The monthly cost of your PMI depends on the home’s value, the amount of your down payment, and your credit score.
Below is a table showing the difference in monthly mortgage payment for a $250,000 home with a 3% down payment and PMI vs. a 20% down payment without PMI:
The first thing you see when looking at the table above is no doubt the added $320 a month that you would be spending on your monthly mortgage cost. The second thing that should stand out is that a 20% down payment is $50,000!
If you are buying your first home, $50,000 is a large sum of money that takes discipline and sacrifice to save. Many first-time buyers save for 5-10 years before buying their homes.
To save $50,000 in 10 years, you would need to save about $420 a month. On the other hand, if you save that same $420 a month, you could afford a 3% down payment in less than a year and a half.
In a recent article by My Mortgage Insider, they explain what could happen in the market while you are waiting to save for a higher down payment:
“The time it takes to save a (larger) down payment could mean higher home prices and tougher qualifying down the road. For many buyers, it could prove much cheaper and quicker to opt for the 3% down mortgage immediately.”
If the prospect of having to pay PMI is holding you back from buying a home today, Freddie Mac has this advice,
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
Based on results of the most recent Home Price Expectation Survey, a homeowner who purchased a $250,000 home in January would gain $50,000 in equity over the next five years based on home price appreciation alone (shown below).
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.
Home values have risen dramatically over the last twelve months. In CoreLogic’s most recent Home Price Index Report, they revealed that national home prices have increased by 6.2% year-over-year.
CoreLogic broke down appreciation even further into four price ranges, giving us a more detailed view than if we had simply looked at the year-over-year increases in national median home price.
The chart below shows the four price ranges from the report, as well as each one’s year-over-year growth from July 2017 to July 2018 (the latest data available).
It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor which determines how much your home has appreciated over the course of the last year.
Lower-priced homes have appreciated at greater rates than homes at the upper ends of the spectrum due to demand from first-time home buyers and baby boomers looking to downsize.
If you are planning to list your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.
According to the National Association of Realtors the average number of years spent in a home is about 6. However, numerous variables have impacted this stat in the last several years.
After 21 months in the top spot for home price increases Seattle finally falls to Las Vegas as the number one market.
The month of August shaped up exactly how I expected it to. The summer slow down was in full effect with uninterested buyers and over eager sellers.
If you haven’t heard me say this already, imagine me repeating it loudly right now. The summer slowdown is real and represents a great time to buy. Read on for my July analysis and reasons why you should either jump in or hold tight.
The long and short of it is yes, no, or maybe. As many are aware the rates are higher than they were last year and will continue to go up as we head into 2019. Does refinancing make sense for anyone right now? It likely could. See below for my top two reasons to consider refinancing before rates go up again.
Everyone thinks buying and selling in the summer is the ideal move and it makes sense on many levels. School is out, weather cooperates, people are feeling happy, and relocation is in full swing. But, when I stop and analyze what continuously happens at this time of year another story unfolds.