How Much Do You Know About Down Payments?

How Much Do You Know About Down Payments?

 

Whether you’ve owned a home before, or you’re ready to jump into homeownership for the first time, there are always a lot of questions swirling around about what is truly required for a down payment, and how to best source down payment assistance. Let’s tackle these two today.

1. How much do you really need for a down payment?

There is a long-standing misconception about down payment requirements. A survey from Fannie Mae shows only 17% of consumers know the minimum options are actually between 1 – 5% of the purchase price and 40% don’t know how much they need at all.

There are many mortgage loans available that require as little as 3% down for first-time buyers, and some ask for only 3.5% down from repeat buyers. There are even loans available for Veterans that provide 0% down payment options too.

We’ve mentioned recently that you don’t need to come up with a 20% down payment to buy, and we’ve also shared how quickly you can save for a 3% or 10% down payment, depending on where you live. If you’re planning to put down just 3%, the research shows it may be possible in most states to have enough saved for a down payment in less than a year. That puts homeownership in a much closer reach for many potential buyers, maybe even you!

2. How can I get help with my down payment?

Regardless of the loans available, many buyers still need assistance with a down payment. The great news is, there are a lot of ways to tap into down payment assistance options. Here are just a couple of them:

Assistance from Family Members

The National Association of Realtors (NAR) said, “a third of recent first-time buyers received down payment assistance from family members.” They also mentioned, “the average net worth of those aged 75 and over stands at $264,800…They just might offer the boost the next generation needs to become homeowners.

That means one of the ways to find help with a down payment is to accept a gift from a family member. If this is an option for you, make sure you talk to your loan officer before you accept the money, to ensure you document the process the way it is required by your loan. This way, it will be received properly and you can still potentially qualify.

Down Payment Assistance Programs

The reality is, not everyone has a loved one or a family member who can provide help with a down payment. There are, however, more than 2,500 down payment assistance programs available (by local areas like city, county, or neighborhood), and some of them are even specifically for first-time buyers.

The gap, as mentioned in the same survey, is “only 23% of consumers are familiar with low down payment programs.”

That’s why it is so important to get familiar with these options by doing your homework before you plan to buy a home. Determine what is available in the area where you ultimately want to live, so you have all the details you need to take advantage of the down payment assistance option that is best for your family.

Bottom Line

If buying a home is one of your long-term goals, you may be able to get there sooner than you think by tapping into one of the many down payment assistance programs available. Contact The Indigo Skye Group for more information to help you get started.

Building Wealth in Real Estate Begins Now

3 Powerful Reasons to Buy a Home Now

Whether you are a first-time buyer or looking to move up to the home of your dreams, now is a great time to purchase a home. Here are three major reasons to buy today.

1. Affordability

Many people focus solely on price when talking about home affordability. Since home prices have appreciated throughout the past year, they assume homes are less affordable. However, affordability is determined by three components:

  • Price
  • Wages
  • Mortgage Interest Rate

Prices are up, but so are wages – and interest rates have recently dropped dramatically (see #2 below). As a result, the National Association of Realtors’ (NAR) latest Affordability Index report revealed that homes are MORE affordable throughout the country today than they were a year ago.

“All four regions saw an increase in affordability from a year ago. The South had the biggest gain in affordability of 6.9%, followed by the West with a gain of 6.0%. The Midwest had an increase of 5.8%, followed by the Northeast with the smallest gain of 1.8%.”

2. Mortgage Interest Rates

Mortgage rates have dropped almost a full point after heading toward 5% last fall and early winter. Currently, they are below 4%.
3 Powerful Reasons to Buy a Home Now | MyKCMAdditionally, Fannie Mae recently predicted the average rate for a 30-year fixed mortgage will be 3.7% in the second half of 2019. That compares to a 4.4% average rate in the first quarter and 4% in the second quarter.

With mortgage rates remaining near historic lows, Fannie Mae and others have increased their forecasts for housing appreciation for the rest of the year. If home price gains are about to re-accelerate, buying now rather than later makes financial sense.

3. Increase Family Wealth

Homeownership has always been recognized as a sensational way to build long-term family wealth. A new report by ATTOM Data Solutions reveals:

“U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since purchase of $67,500, up from an average gain of $57,706 in Q1 2019 and up from an average gain of $60,100 in Q2 2018. The average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of original purchase price.”

The longer you delay purchasing a home, the longer you are waiting to put the power of home equity to work for you.

Bottom Line

With affordability increasing, mortgage rates decreasing, and home values about to re-accelerate, it may be time to make a move. Let’s get together to determine if buying now makes sense for your family.

10 Steps to Buying a Home This Summer [INFOGRAPHIC]

Some Highlights:

  • If you are thinking of buying a home, you may not know where to start.
  • Here is a simple list of 10 steps that you will go through to purchase a home.
  • Call The Indigo Skye Group and ask for details about each step and what else may be required in your area!

Time for Your Dream Home, Gen X!

During the housing market crash, Gen X homeowners lost more wealth than other generations. However, things are changing now! A strong economy, increasing home prices, and the recovery of the housing market are helping this generation to regain their lost wealth.

According to Pew Research Center,

Their fortunes have rebounded more than those of other generations during the post-recession economic expansion and as home and stock prices have risen. Since 2010, the median net worth of Gen X households has risen 115%. In fact, in 2016, the most recent year with available data, the net worth of a typical Gen X household had surpassed what it was in 2007 ($84,200 vs. $63,400)”.

The same report also mentioned,

15% of Gen X’s homeowners were ‘underwater’ on their homes in 2010 (meaning they owed more than they owned). By 2016 only 3% were underwater.

As a result of homes regaining market value and their increasing net worth, many Gen Xers are presented with the opportunity of selling their current home in order to move up to the house they always dreamed of!

According to the 2019 Home Buyers and Sellers Generational Trends Report by the National Associations of Realtors, in 2018 Gen Xers made up the second largest share of home buyers by generation at 24%.

The report also provided some highlights about their purchase:

  • Greatest share that purchased a multi-generational home (16%).
  • Largest share that purchased a detached single-family home (88%).
  • Highest median household income ($111,100).
  • Bought the most expensive homes of all the generations.
  • Job-related relocation was identified as the primary reason to buy.

But this generation is not only buying- they are selling too!

  • Largest share of home sellers (25%).
  • Highest median household income among sellers ($123,600).
  • Tenure in the previous home was a median of 9 years.
  • House too small was indicated as the primary reason to sell.
  • 91% sold the home using a real estate professional.

Bottom Line

If you are a Gen Xer who would like to know exactly how much your house is worth today so you can move up to the home of your dreams, let’s get together to analyze your current circumstances.

4 Tips for Making a Competitive Offer

So, you’ve been searching for that perfect house to call ‘home,’ and you’ve finally found it! The price is right, and in such a competitive market, you want to make sure you make a good offer so that you can guarantee that your dream of making this house yours comes true!

Below are 4 steps provided by Freddie Mac to help buyers make offers, along with some additional information for your consideration:

1. Determine Your Price

“You’ve found the perfect home and you’re ready to buy. Now what? Your real estate agent will be by your side, helping you determine an offer price that is fair.”

Based on your agent’s experience and key considerations (like similar homes recently sold in the same neighborhood or the condition of the house and what you can afford), your agent will help you to determine the offer that you are going to present.

Getting pre-approved will not only show home-sellers that you are serious about buying, but it will also allow you to make your offer with confidence because you’ll know that you have already been approved for a mortgage in that amount.

2. Submit an Offer

“Once you’ve determined your price, your agent will draw up an offer, or purchase agreement, to submit to the seller’s real estate agent. This offer will include the purchase price and terms and conditions of the purchase.”

Talk with your agent to find out if there are any ways in which you can make your offer stand out in this competitive market! A licensed real estate agent who is active in the neighborhoods you are considering will be instrumental in helping you put in a solid offer.

3. Negotiate the Offer

“Oftentimes, the seller will counter the offer, typically asking for a higher purchase price or to adjust the closing date. In these cases, the seller’s agent will submit a counteroffer to your agent, detailing their desired changes, at this time, you can either accept the offer or decide if you want to counter.

Each time changes are made through a counteroffer, you or the seller have the option to accept, reject or counter it again. The contract is considered final when both parties sign the written offer.”

If your offer is approved, Freddie Mac urges you to “always get an independent home inspection, so you know the true condition of the home.” If the inspector uncovers undisclosed problems or issues, you can discuss any repairs that may need to be made with the seller or even cancel the contract altogether.

4. Act Fast

The inventory of homes listed for sale has remained well below the 6-month supply that is needed for a ‘normal’ market. Buyer demand has continued to outpace the supply of homes for sale, causing buyers to compete with each other for their dream homes.

Make sure that as soon as you decide that you want to make an offer, you work with your agent to present it as quickly as possible.

Bottom Line

Whether buying your first home or your fifth, having a local real estate professional who is an expert in his or her market on your side is your best bet in making sure the process goes smoothly. Let’s talk about how we can make your dream of homeownership a reality!

Home Buyers are Optimistic About Homeownership!

When we consider buying an item, we naturally go through a research process prior to making our decision. We ask our friends and family members who have made similar purchases about their experience, we get opinions and insights, and we read reviews online. There’s no difference when considering a home purchase!

Most homebuyers start by listening to the news to hear what is being said about the real estate market. They check with family and friends about their experience. They spend time online reading reviews about their desired neighborhood.

The challenge is that comments from the news and those closest to us can contradict the data and reports. One source says one thing, while another source says something completely different.

There is a group of homebuyers that are not allowing comments about an upcoming recession to interfere with their decision to buy a home. According to a survey by realtor.com®,

Nearly 70 percent of home shoppers this spring think the U.S. will enter a recession in the next three years, but that hasn’t stopped them from trying to close on a home…Despite the fact that they foresee an economic downturn, they generally expressed confidence that a future recession will be better than 2008 for the housing market.”

The report provides more insights from the survey:

  • Nearly 30% of the active home shoppers* surveyed expect the next recession to begin sometime in 2020.
  • 56% of shoppers believe home prices have hit their peak.
  • 41% believe housing will fare better than 2008.
  • 45% of home shoppers feel at least slightly more optimistic about homeownership.
  • 33% reported no impact on their feelings about homeownership.

Homebuyers are aware and making decisions with their eyes wide-open. As the report mentioned,

“The fact that some [36%] home shoppers expect the next recession to be harder on the housing market than the last recession suggests that they are buying homes with eyes wide-open and very sober, if not slightly pessimistic, views of the housing market.

This is a stark contrast to the years leading up to the last recession when ‘irrational exuberance’ was more common and yet another reason to expect that the next downturn will be very different for the housing market than the last.”

Bottom Line

If you are considering buying a home, let’s get together to help you understand our local market and determine if buying a home is the right choice for you now.

*Active home shoppers are those consumers who responded that they plan to purchase their next home in 1 year or less.

Related Article: Buying a house this year? Here is the first step!

Buyer Demand Surging as Spring Market Begins

Last fall, some predicted that the 2019 residential real estate market would be a disaster. There was even belief we might experience a housing crash like the one that occurred during the last decade.

However, according to two separate reports*, buyer demand dramatically increased over the last three months, leading into this spring buyers’ market (the March data is not yet available).

Both the ShowingTime Showing Index and the National Association of REALTORS Buyer Traffic Index show that buyer demand has increased in each of the last three months.

Why the increase in demand? Increased buying power.

According to the National Association of Realtors’ Economists’ Outlook Blog, purchasing a home has become more affordable, which has led to increased demand.

“Due to the combination of falling home prices and mortgage rates, the income needed to make an affordable mortgage payment (mortgage no more than 25% of income) on a median-priced home with 10% down payment and 30-year fixed rate mortgage decreased from $60,425 in June 2018 to $53,783 as of February 2019, and the difference of $6,642 represents a gain in buying power because one can afford a home purchase at a lower level of income.”

Bottom Line

It appears the spring buyers’ market is going to be much stronger than many had projected. Whether you are selling or buying, this is important news.

Related Article: A Healthier Home Market Ahead

*The methodology behind the indices:

The ShowingTime Showing Index

“The ShowingTime Showing Index® tracks the average number of buyer showings on active residential properties on a monthly basis, a highly reliable leading indicator of current and future demand trends.”

The National Association of REALTORS® Buyer Traffic Index

“In a monthly survey of REALTORS®, NAR asks respondents ‘Compared to the same month last year, how would you rate the past month’s traffic in neighborhood(s) or area(s) where you make most of your sales?’ NAR compiles the responses into an index, where an index above 50 indicates that more respondents reported “stronger” traffic than “weaker” traffic.”

Home Buyer Demand Will Be Strong for Years to Come

…more and more research has surfaced that shows for the vast majority, owning a home is a major part of their American Dream!

There has been a lot written about millennials and their preference to live in city centers above their favorite pizza place. Some have even gone so far as to say that millennials are a “Renter-Generation”.

And while this might be true for some millennials, more and more research has surfaced that shows for the vast majority, owning a home is a major part of their American Dream!

New research shows that 66% of millennials who currently rent are determined to buy a home! Seventy-three percent of those surveyed by Pulsenomics plan to buy a home in the next five years, with 40% planning to do so within the next two years!

home buyer demand is high indigo skye group blog

Bottom Line

Are you one of the millions of renters who are ready and willing to buy a home? Let’s get together to determine your ability to buy now!

Related Article: Homeownership is a Dominant Gene

Homeownership is a Cornerstone of the American Dream

Homeownership is a Cornerstone of the American Dream

“The rumors of my death are greatly exaggerated.”

The famous quote attributed to Mark Twain can apply to homeownership in the United States today. During the housing bubble of the last decade, the homeownership rate soared to over sixty-nine percent. After the crash, that percentage continued to fall for the next ten years.

That led to speculation that homeownership was no longer seen as a major component of the American Dream. That belief became so widespread that the term “renters’ society” began to be used by some to define American consumers.

However, the latest report by the Census Bureau on homeownership shows that over the last two years, the percentage of homeowners has increased in each of the last eight quarters.

Homeownership is a Cornerstone of the American Dream |MyKCM

Going forward…

It appears the homeownership rate will continue to increase.

The 2019 Aspiring Home Buyers Profile recently released by the National Association of Realtors revealed that 84% of non-owners want to own a home in the future. That percentage increased from 73% earlier last year.

Bottom Line

In the United States, the concept of homeownership as part of the American Dream is very much alive and well. Indigo Skye Group with Compass Realty is dedicated to helping you find your place in the American Dream – contact us to learn about your options!

 

Related Article: Buying a home young is the key to building wealth

Interest Rates Hit New 12 Month Low!

Interest Rates Hit New 12 Month Low!

According to Freddie Mac’s Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at their lowest for 2019. Rates like these haven’t been seen since February 2018!

Last week’s survey results reported an interest rate of 4.35%. This is a welcome change from the near 5% rates seen in mid-November. At 4.32%, the second week of February 2018 was the last time rates were this low. This can be seen in the chart below.

interest rates hit new low indigo skye group blog

Freddie Mac’s Chief Economist, Sam Khater, had this to say:

“Mortgage rates fell for the third consecutive week, continuing the general downward trend that began late last year.

Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months.”

Bottom Line

If you plan on buying a home this spring, meet with a local real estate professional who can help prepare you for today’s market before rates increase!

 

Related Article: Where are Interest Rates Headed in 2019?