Are You Spending TOO Much on Rent?

Chances are if you are renting you are spending too much of your income on your monthly housing expense. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their rent or mortgage payment. This percentage allows the household to save money for the future while comfortably covering other expenses. According to new data released from ApartmentList.com, 49.5 million renters in the United States were cost-burdened in 2017, meaning they spent more than 30% of their monthly incomes on rent. This accounts for nearly half of all renter households in the country and is up 3.1 million from 2007. When a household is cost-burdened by their monthly housing expense, they are not as easily able to save money for the future. This is a big factor for many renters who dream of owning their own homes someday. But there is hope for those who are able to save at least a 3% down payment! The percentage of income needed in the US to buy a home is significantly less than renting at 17.1%! The chart below compares the historic percentage of income needed to rent and buy from 1985-2000 to the first quarter of 2018. As you can see, the cost of renting has climbed above historic numbers while the cost of buying dropped over the same period of time. Bottom Line If you are one of the many renters who is spending too much of their monthly income on rent, consider saving…

Still Think You Need 15-20% Down to Buy a Home? Think Again!

According to a new study from Urban Institute, there are over 19 million millennials in 31 cities who are not only ready and willing to become homeowners, but are able to as well! Now that the largest generation since baby boomers has aged into prime homebuying age, there will no doubt be an uptick in the national homeownership rate. The study from Urban Institute revealed that nearly a quarter of this generation has the credit and income needed to purchase a home. Surprisingly, the largest share of mortgage-ready millennials lives in expensive coastal cities. These cities often attract highly skilled workers who demand higher salaries for their expertise. So, what’s holding these mortgage-ready millennials back from buying? Myths About Down Payment Requirements!  Most of the millennials surveyed for the study believe that they need at least a 15% down payment in order to buy a home when, in reality, the median down payment in the US in 2017 was just 5%, and many programs are available for even lower down payments! The study goes on to point out that: “Despite limited awareness, every state has programs that provide grants and loans to make homeownership more attainable, with average assistance in various states ranging from $2,436 to $21,171.” Bottom Line With so many young families now able to buy a home in today’s market, the demand for housing will continue for years to come. If you are one of the many millennials who have questions about their ability to buy in…

The Cost of NOT Paying PMI

Saving for a down payment is often the biggest hurdle for a first-time homebuyer as median incomes, rents, and home prices all vary depending on where you live. There is a common misconception among homebuyers 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…

Having Trouble Saving Enough for Your Down Payment? Crowdfund It!

You read that right! First-time buyers across the country are getting creative when it comes to saving the necessary down payment to buy a home. Many couples are asking their wedding guests to contribute to their “Down Payment Fund” rather than fulfilling a traditional registry. This is fueled by the fact that many couples live together prior to marriage and already have the necessary items to make a house a home…they just need the house! The average wedding in the United States has 120 guests who give wedding gifts valued, on average, at $186. This means that couples could walk away from their nuptials with over $22,000 towards their down payment! Services like HomeFundMe allow friends, family members, and almost anyone else in a buyer’s network to contribute funds toward the buyer’s down payment. Contributors can determine, at the time of their donation, if their gifts are ‘conditional’ or ‘non-conditional’ on the beneficiary buying a home. According to a recent Wall Street Journal article, “about 400 borrowers have used HomeFundMe to help buy homes since the program launched in October and on average, they raise about $2,500.” The article went on to explain that most borrowers use these funds in combination with their personal savings to shorten the time needed to achieve their goal of homeownership. There are more and more programs surfacing from lenders that allow buyers to put down as little as 3% to buy their dream home. Fannie Mae and Freddie Mac loan programs require 3% down…

What You Need to Know About the Mortgage Process [INFOGRAPHIC]

Some Highlights: Many buyers are purchasing a home with a down payment as little as 3%. You may already qualify for a loan, even if you don’t have perfect credit. Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.

First-Time Home Buyers Continue to Put Down Less Than 6%!

According to the Realtors Confidence Index from the National Association of Realtors, 61% of first-time homebuyers purchased their homes with down payments below 6% in 2017. Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying, but in March, 71% of first-time buyers and 54% of all buyers put less than 20% down. Ralph McLaughlin, Chief Economist and Founder of Veritas Urbis Economics, recently shed light on why buyer demand has remained strong, “The fact that we now have four consecutive quarters where owner households increased while renters households fell is a strong sign households are making the switch from renting to buying. Households under 35 – which represent the largest potential pool of new homeowners in the U.S. – have shown some of the largest gains. While they only make up a third of all homebuyers, the steady uptick in their homeownership rate over the past year suggests their enormous purchasing power may be finally coming to [the] housing market.” It’s no surprise that with rents rising, more and more first-time buyers are taking advantage of low-down-payment mortgage options to secure their monthly housing costs and finally attain their dream homes. Bottom Line If you are one of the many first-time buyers unsure of whether or not they would qualify for a low-down payment mortgage, let’s get together and set you on your path to homeownership!

You DO NOT Need 20% Down to Buy Your Home NOW!

The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that the main reason why non-homeowners do not own their own homes is because they believe that they cannot afford them. This brings us to two major misconceptions that we want to address today. 1. Down Payment A recent survey by Laurel Road, the National Online Lender and FDIC-Insured Bank, revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the survey, 53% of Americans who plan to buy or have already bought a home admit to their concerns about their ability to afford a home in the current market. In addition, 46% are currently unfamiliar with alternative down payment options, and 46% of millennials do not feel confident that they could currently afford a 20% down payment. What these people don’t realize, however, is that there are many loans written with down payments of 3% or less. Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket. 2. FICO®Scores An Ipsos survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores for approved conventional and FHA mortgages are much lower. The average conventional loan…

3 Tips for Making Your Dream of Owning a Home a Reality [INFOGRAPHIC]

Some Highlights: Setting up an automatic savings plan that saves a small amount of every check is one of the best ways to save without thinking much about it. Living within a budget right now will help you save money for down payments while also paying down other debts that might be holding you back. What are you willing to cut back on to make your dreams of homeownership a reality?

You Can Save for a Down Payment Faster Than You Think!

Saving for a down payment is often the biggest hurdle for a first-time homebuyer. Depending on where you live, median income, median rents, and home prices all vary. So, we set out to find out how long it would take to save for a down payment in each state. Using data from the United States Census Bureau and Zillow, we determined how long it would take, nationwide, for a first-time buyer to save enough money for a down payment on their dream home. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their monthly housing expense. By determining the percentage of income spent renting in each state, and the amount needed for a 10% down payment, we were able to establish how long (in years) it would take for an average resident to save enough money to buy a home of their own. According to the data, residents in Ohio can save for a down payment the quickest in just under 3 years (2.44). Below is a map that was created using the data for each state: What if you only needed to save 3%? What if you were able to take advantage of one of Freddie Mac’s or Fannie Mae’s 3%-down programs? Suddenly, saving for a down payment no longer takes 5 or 10 years, but becomes possible in a year or two in many states as shown on the map below. Bottom Line Whether you have just started to…

It’s Tax Season… Use Your Refund to Jump Start Your Down Payment Savings!

According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $2,840 this year when filing their taxes. This is down slightly from the average refund of $2,895, last year. Tax refunds are often thought of as ‘extra money’ that can be used toward larger goals; for anyone looking to buy a home in 2018, this can be a great jump start toward a down payment! The map below shows the average tax refund Americans received last year by state. (The refunds received for the 2017 tax year should continue to reflect these numbers as the new tax code will go into effect for 2018 tax filings.) Many first-time buyers believe that a 20% down payment is required to qualify for a mortgage. Programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae all allow for down payments as low as 3%, with Veterans Affairs Loans allowing many veterans to purchase a home with 0% down. If you started your down payment savings with your tax refund check this year, how close would you be to a 3% down payment? The map below shows what percentage of a 3% down payment is covered by the average tax refund by taking into account the median price of homes sold by state. The darker the blue, the closer your tax refund gets you to homeownership! For those in Alabama looking to purchase their first homes, their tax refund could potentially get them 69% closer…