Learning the lingo of home buying is an important part of feeling successful when buying a home.
From APR to P&I, you need to know the acronyms that will come up along the way, and what they mean when you hear them.
Your local professionals are here to help you feel confident and informed from start to finish…and this infographic will help you as you go.
The cost of waiting…
**The “cost of waiting to buy” is defined as the additional funds necessary to buy a home if prices and interest rates were to increase over a period of time.
** Freddie Mac forecasts interest rates will rise to 3.8% by Q4 2020.
** CoreLogic predicts home prices will appreciate by 5.4% over the next 12 months.
** If you’re ready and willing to buy your dream home, now is a great time to buy.
Contact a real estate professional to help you buy your home!
Owning a home has great financial benefits.
In a recent research paper, Homeownership and the American Dream, Laurie S. Goodman and Christopher Mayer of the Urban Land Institute explained:
“Homeownership appears to help borrowers accumulate housing and nonhousing wealth in a variety of ways, with tax advantages, greater financial flexibility due to secured borrowing, built-in ‘default’ savings with mortgage amortization and nominally fixed payments, and the potential to lower home maintenance costs through sweat equity.”
Let’s breakdown 5 major financial benefits of homeownership:
1. Housing is typically the one leveraged investment available
Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. A 20% down payment results in a leverage factor of five, meaning every percentage point rise in the value of your home is a 5% return on your equity. If you put down 10%, your leverage factor is 10.
Example: Let’s assume you purchased a $300,000 home and put down $60,000 (20%). If the house appreciates by $30,000, that is only a 10% increase in value but a 50% increase in equity.
2. You’re paying for housing whether you own or rent
Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are baked into the rent payment already – along with a profit margin!!
3. Owning is usually a form of “forced savings”
Studies have shown that homeowners have a net worth that is 44X greater than that of a renter. As a matter of fact, it was recently estimated that a family buying an average priced home this past January could build more than $42,000 in family wealth over the next five years.
4. Owning is a hedge against inflation
House values and rents tend to go up at or higher than the rate of inflation. When you own, your home’s value will protect you from that inflation.
5. There are still substantial tax benefits to owning
We know that the new tax reform bill puts limits on some deductions on certain homes. However, in the research paper referenced above, the authors explain:
“…the mortgage interest deduction is not the main source of these gains; even if it were removed, homeowners would continue to benefit from a lack of taxation of imputed rent and capital gains.”
From a financial standpoint, owning a home has always been and will always be better than renting.
When you’re ready to own, make sure to contact a real estate professional to assist you along the way and find the right home for you.
Freddie Mac recently released a report entitled, “Perceptions of Down Payment Consumer Research.” Their research revealed that,
“For many prospective home buyers, saving for a down payment is the largest barrier to achieving the goal of home ownership. Part of the challenge for those planning to purchase a home is their perception of how much they will need to save for the down payment…
…Based on our recent survey of individuals planning to purchase a home in the next three years, nearly a third think they need to put more than 20% down.”
Buyers often overestimate the funds needed to qualify for a home loan. According to the same report:
22% of renters and 31% of homeowners believe lenders require 20% or more of a home’s sale price as a down payment for a typical mortgage today. And,
“If a 20% down payment was required, 70% of those who were planning to buy a home in the next three years said it would delay them from purchasing and nearly 30% indicated they would never be able to afford a home.”
While many believe at least 20% down is necessary to buy the home of their dreams, they do not realize programs are available which permit as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined!
Many either don’t know or are misinformed concerning the FICO® score necessary to qualify, believing a ‘good’ credit score is 780 or higher.
To debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.
As indicated in the chart above, 52.4% of approved mortgages had a credit score of 600-749.
Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach. Contact a real estate professional to help you on the way to owning your own home.
In many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Many potential homebuyers overestimate the down payment and credit scores necessary to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.
Some Highlights:
Buying a home can be intimidating if you are not familiar with the terms used during the process.
To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home.
The best way to ensure that your home-buying process is a confident one is to find a real estate professional who not only puts your family’s needs first, but will guide you through every aspect of the transaction with ‘the heart of a teacher.’
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.
When you’re ready to buy your home, make sure to deal with a real estate professional!
If you’re in the South Florida area, visit taraburner.net for local Realtor who puts your needs first and delivers the service you deserve.
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 closed in May had a credit score of 753, while FHA mortgages closed with an average score of 676. The average across all loans closed in May was 724. The chart below shows the distribution of FICO® Scores for all loans approved in May.
Bottom Line
If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but you are not sure if you are ‘able’ to, let’s sit down to help you understand your true options today.