Archive for the ‘Down Payments’ Category
Are you prepping to buy your first home? If so, one of the steps you should take early on is making sure you’re financially ready for your purchase. Here are just a few of the financial fundamentals you’ll need to focus on as you set out to buy a home.
Build Your Credit
Your credit is one element that helps determine which home loan you’ll qualify for. It also impacts your mortgage interest rate. While there are many factors that go into your mortgage application, a higher credit score could lead to a lower monthly payment in the long run.
So how do you make sure your credit is in the best shape possible when it’s time to buy? A recent article from NerdWallet lists a few tips you can use as you work to build and strengthen your credit. They include:
- Tracking your credit and disputing any errors that show up on your reports.
- Paying your bills on time. This includes making loan payments and paying down any open lines of credit.
- Keeping your credit card balances low. Paying more than your minimum monthly balance when you’re able can help.
Automate Your Savings for Your House Fund
You might also be wondering how you can achieve your down payment savings goals. Bankrate provides buyers with a number of tips to help you save, including searching for down payment assistance programs and ways you can save more, faster. As the article says:
“One of the best ways to save for anything — including a down payment — is to set it and forget it. If you receive a regular paycheck, ask your employer to direct a portion of that payment into a savings account. If you’re a freelance worker or independent contractor, set up a recurring transfer from a checking account to a savings account to establish the routine.”
As you prepare for your purchase, you’ll also need to have a good grasp on your budget and how much you’ll be able to borrow for your home loan. That’s where the pre-approval process comes in.
Pre-approval from a lender lets you know how much money you can borrow for your home loan. And having that knowledge, plus an understanding of your savings, can help you decide on your target price range for a house.
From there, you can start browsing for houses online and see what’s available in your area in that general price point. This can help you really understand your options so you can start to picture your future home.
For Customized Advice, Build a Team of Professionals
Finally, the best way to make you’re prepared for your purchase is to connect with trusted real estate professionals. Having expert advisors in the industry will help you make strong decisions throughout the homebuying process based on your specific goals, finances, and situation. They know the market and can guide you toward the home of your dreams.
If you’re ready to get the homebuying process started, let’s connect so you can begin to build your team of professionals today.
- VA Loans can help make homeownership possible for those who have served our country.
- These loans offer great benefits for eligible individuals and can help them buy a VA-approved house or condo, build a new home, or make improvements to their house.
- Homeownership is the American Dream. One way we can honor and thank our veterans is to ensure they have the best information about the benefits of VA home loans.
For over 78 years, Veterans Affairs (VA) home loans have provided millions of veterans with the opportunity to purchase homes of their own. If you or a loved one have served, it’s important to understand this program and its benefits.
Here are some things you should know about VA loans before you start the homebuying process.
What Are VA Loans?
VA home loans provide a pathway to homeownership for those who have served our nation. The U.S. Department of Veterans Affairs describes the program like this:
“VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.”
Top Benefits of the VA Home Loan Program
In addition to helping eligible buyers achieve their homeownership dreams, VA loans have several other great benefits for buyers who qualify. According to the Department of Veteran Affairs:
- Qualified borrowers can often purchase a home with no down payment.
- Many other loans with down payments under 20% require Private Mortgage Insurance (PMI). VA Loans do not require PMI, which means veterans can save on their monthly housing costs.
- VA-Backed Loans often offer competitive terms and mortgage interest rates.
A recent article from Veterans United sums up just how impactful this loan option can be:
“For the vast majority of military borrowers, VA loans represent the most powerful lending program on the market. These flexible, $0-down payment mortgages have helped more than 24 million service members become homeowners since 1944.”
John Bell, Acting Executive Director of the Department of Veterans Affairs Loan Guaranty Service, also explains why this program is so powerful:
“It provides early ownership for many people that would not have that opportunity to begin with. Since there’s no down payment, it allows people to hold their wealth and it gives them the ability to have long term financial security by being able to own a house and let that equity grow.”
Homeownership is the American Dream. Our veterans sacrifice so much in service of our nation, and one way we can honor and thank them is to ensure they have the best information about the benefits of VA home loans. Thank you for your service.
If you’re planning to buy a home, knowing what to budget for and how to save may sound scary at first. But it doesn’t have to be. One way to take the fear out of budgeting is understanding some of the costs you might encounter. And to do that, turn to trusted real estate professionals. They can help you plan your finances and prepare your budget.
Here are just a few costs experts say you can expect.
1. Down Payment
Saving for your down payment is likely top of mind as you set out to buy a home. But do you know how much you’ll need to save? While each situation is different, there’s a common misconception that putting 20% down toward your purchase is required. An article from the Mortgage Reports explains why that’s not always the case:
“The idea that you have to put 20% down on a house is a myth. . . . The right amount depends on your current savings and your home buying goals.”
To understand your options, partner with a trusted real estate professional to go over the various loan types, down payment assistance programs, and what each one requires.
2. Closing Costs
“Closing costs are the fees you pay when finalizing a real estate transaction, whether you’re refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it’s important to be financially prepared for this expense.”
The best way to understand what you’ll need at the closing table is to work with a trusted lender. They can provide you with answers to the questions you might have.
3. Earnest Money Deposit
If you want to cover all your bases, you can also consider saving for an earnest money deposit (EMD). An EMD is money you pay as a show of good faith when you make an offer on a house. According to realtor.com, it’s usually between 1% and 2% of the total home price.
This deposit works like a credit. It’s not an added expense – it’s paying a portion of your costs upfront. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house. Realtor.com describes how it works as part of your sale:
“It tells the real estate seller you’re in earnest as a buyer, . . . . Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront.”
Keep in mind, an EMD isn’t required, and it doesn’t guarantee your offer will be accepted. It’s important to work with a real estate advisor to understand what’s best for your situation and any specific requirements in your area. They’ll help you determine what moves you should make in the homebuying process to have the greatest success.
Budgeting for your home purchase doesn’t have to be scary. Let’s connect so you’ll have an expert on your side to answer any questions you have along the way.
When it comes to buying a home, it can feel a bit intimidating to know how much you need to save and where to find that information. But you should know, you’re not expected to have all the answers yourself. There are many trusted professionals who can help you understand your finances and what you’ll need to budget for throughout the process.
To get you started, here are a few things experts say you should plan for along the way.
1. Down Payment
As you set your savings goal for your purchase, your down payment is likely already top of mind. And, like many other people, you may believe you need to set aside 20% of the home’s purchase price for that down payment – but that’s not always the case. The National Association of Realtors (NAR) says:
“One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership. Having this knowledge is critical to know what to save . . .”
The good news is, you may be able to put as little as 3.5% (or even 0%) down in some situations. To understand your options, partner with a trusted professional who can go over the various loan types, down payment assistance programs, and what each one requires.
2. Earnest Money Deposit
Another item you may want to plan for is an earnest money deposit. While it isn’t required, it’s common in today’s highly competitive market because it can help your offer stand out in a bidding war.
So, what is it? It’s money you pay as a show of good faith when you make an offer on a house. This deposit works like a credit. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house. It’s not an added expense, it’s just paying some of that up front. First American explains what it is and how it works:
“The deposit made from the buyer to the seller when submitting an offer. This deposit is typically held in trust by a third party and is intended to show the seller you are serious about purchasing their home. Upon closing the money will generally be applied to your down payment or closing costs.”
In other words, an earnest money deposit could be the very first check you’ll write toward your purchase. The amount varies by state and situation. Realtor.com elaborates:
“The amount you’ll deposit as earnest money will depend on factors such as policies and limitations in your state, the current market, what your real estate agent recommends, and what the seller requires. On average, however, you can expect to hand over 1% to 2% of the total home purchase price.”
Work with a real estate advisor to understand any requirements in your local area and what they’ve recommended for other buyers in your market. They’ll help you determine if it’s something that could be a useful option for you.
3. Closing Costs
“The upfront fees charged in connection with a mortgage loan transaction. …generally including, but not limited to a loan origination fee, title examination and insurance, survey, attorney’s fee, and prepaid items, such as escrow deposits for taxes and insurance.”
Basically, your closing costs cover the fees for various people and services involved in your transaction. NAR has this to say about how much to budget for:
“A home costs more than just the sale price. For example, closing costs—which make up about 2% to 5% of the home’s purchase price—are a major added expense…Lenders provide a Closing Disclosure at least three business days prior to closing on a mortgage. But buyers will need to budget for these added costs ahead of time to avoid sticker shock days before closing.”
The key takeaway is savvy buyers plan ahead for these expenses so they can come into the process prepared. Freddie Mac sums it up like this:
“If you’re in the market to buy a home, your down payment is probably top of mind. And rightly so – it’s likely the biggest cost of homebuying. However, it is not the only cost and it’s critical you understand all your expenses before diving in. The more prepared you are for your down payment, closing and other costs, the smoother your homebuying journey will be.”
Knowing what to budget for in the homebuying process is essential. To make sure you understand these and any other expenses that may come up, let’s connect so you have reliable expertise on what to expect when you buy a home.
- Knowing key housing terms and how they relate to today’s market is important. For example, when mortgage rates and home prices rise, it impacts how much home you can afford.
- Terms like appraisal (what lenders rely on to validate a home’s value) and the inspection contingency (which gives buyers essential information on a home’s condition) directly impact the transaction.
- Buying a home can be intimidating if you’re not familiar with the terms used throughout the process. Let’s connect so you have an expert guide and advice for any questions that may come up.
For many homebuyers, the thought of saving for a down payment can feel daunting, especially in today’s market. That’s why, when asked what they find most difficult in the homebuying process, some buyers say it’s one of the hardest steps on the path to homeownership. Data from the National Association of Realtors (NAR) shows:
“For first-time home buyers, 29 percent said saving for a downpayment [sic] was the most difficult step in the process.”
If you’re finding that your down payment is your biggest hurdle, the good news is there are many down payment assistance programs available that can help you achieve your goals. The key is understanding where to look and learning what options are available. Here’s some information that can help.
First-Time and Repeat Buyers Are Often Eligible
According to downpaymentresource.com, there are thousands of financial assistance programs available for homebuyers, like affordable mortgage options for first-time buyers. But, of the many programs that are available, down payment assistance options make up the large majority. They say 73% of the assistance available to homebuyers is there to help you with your down payment.
And it’s not just first-time homebuyers that are eligible for these programs. Downpaymentresource.com notes:
“You don’t have to be a first-time buyer. Over 38% of all programs are for repeat homebuyers who have owned a home in the last 3 years.”
That means no matter where you are in your homeownership journey, there could be an option available for you.
There Are Local Programs and Specialized Programs for Public Servants
There are also multiple down payment assistance resources designed to help those who serve our communities. Teacher Next Door is one of those programs:
“The Teacher Next Door Program was designed to increase home ownership among teachers and other public servants, support community development and increase access to affordable housing free from discrimination.”
Teacher Next Door is just one program that seeks to help teachers, first responders, health providers, government employees, active-duty military personnel, and veterans reach their down payment goals.
And, most importantly, even if you don’t qualify for these types of specialized programs, there are many federal, state, and local programs available for you to explore. And the best way to do that is to connect with a local real estate professional to learn more about what’s available in your area.
If saving for a down payment seems daunting, there are programs available that can help. And if you work to serve our community, there may be even more opportunities available to you. To learn more about your options, let’s connect so you can start your homebuying journey today.
If you’re a millennial, homebuying might be top of mind for you. Your generation is the largest group of homebuyers in the market today and has been since 2014, according to the National Association of Realtors (NAR). And while other millennials are looking to buy for the first time, you may be one of the many who are now discovering you’ve outgrown your home.
If that’s the case, you’re not alone. The past two years brought about significant changes for many people, and today, homeowners are reevaluating what they truly need in a home. As a recent report from the Wall Street Journal states:
“They say the pandemic and the emergence of remote work accelerated millennial home-buying trends already under way. . . . Millennials who already owned homes traded up for more space.”
So, if you’re working remotely now or simply have a growing need for additional space, it may be time to move. And even if you purchased your current home sometime over the last few years, you can still move into a different one that has the space and features you’re looking for. That’s because there’s a good chance you have more equity than you realize. As Diana Olick, Real Estate Correspondent for CNBC, notes:
“The stunning jump in home values over the course of the Covid-19 pandemic has given U.S. homeowners record amounts of housing wealth. . . . Even homeowners who weren’t listing their properties for sale were gaining equity. About 42% of homeowners were considered equity-rich at the end of last year, meaning their mortgages were half or less than half the value of their home.”
Growing equity can be the key you need to fuel your next move, especially if you’re looking to purchase a larger home. When you sell your current house, the equity that comes back to you in the sale can be used toward the down payment on your next home.
In other words, your purchasing power may be greater than you realize, making a move to a larger home a realistic option. That, plus your changing needs, might make moving now more desirable than ever.
If you’re a millennial thinking about moving this year, you’re not alone. Let’s connect today to discuss the equity you have in your current home and the opportunities it can create.
- Even in today’s sellers’ market, there are still ways for buyers to win big.
- Build a team of trusted professionals and make strategic plays as you budget and pick your desired neighborhoods. Then, be ready for the competition by getting a pre-approval letter and leaning on your expert advisors to draft a winning offer.
- In a sellers’ market, you can still be the champion if you have the right team and strategy. Let’s connect today to make your game-winning play.