How Quickly Can You Save Your Down Payment?

How Quickly Can You Save Your Down Payment?

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 HUDCensus and Apartment List, 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 Kansas can save for a down payment the quickest, doing so in just over 1 year (1.12). Below is a map that was created using the data for each state:

Years needed to save a 10% down payment

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’s3%-down programs? Suddenly, saving for a down payment no longer takes 2 to 5 years, but becomes possible in less than a year in most states, as shown on the map below.

How long would it take to save 3% down payment

Bottom Line

Whether you have just begun to save for a down payment or have been saving for years, you may be closer to your dream home than you think!

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Can a Mortgage Really Be Affordable?

Can a Mortgage Really Be Affordable?

Can a Mortgage Really Be Affordable?

Guest Post by Tim Britt

Last month I started a discussion about the different categories of mortgage programs.  Mortgage Loans can easily be broken down into 3 broad categories:  Traditional, Affordable, and Specialty.  This month, I’ll talk about Affordable Mortgage Loan Programs, and some of the features of them.

Affordable Mortgages are loan programs backed by government agencies, or specially designed by Fannie Mae and Freddie Mac (Conforming Loan Programs) to be affordable in a variety of different ways. 

These programs help borrowers realize their homeownership dreams through products featuring lower down payment options, lower loan costs, as well as lower credit thresholds (in some cases).  These also include Down-Payment Assistance and Grant Programs offered by banks through the Community Reinvestment Act or through state/local government agencies. 

I’m often asked…”what programs do you have for a First-Time Homebuyer?” 

Unfortunately, this question can be a little misleading.  In some cases, the person asking really wants to know if they can purchase a home without contributing any of their own assets (i.e. no down payment or closing expenses)…basically exchanging their current rent payment for an equivalent house payment.  This is not the primary purpose of Affordable Mortgage products.  These programs are not specifically designed for a “first-time” homebuyer.

Potential clients for Affordable Mortgages include those with moderate and lower income levels, some first-time buyers who may have lower down payment ability (e.g. less than 5%), as well as those who may have had past credit challenges. 

Some examples and highlights of these programs are:

  • Home
    Possible/Home Ready
    :  Conforming Loan
    Program(s) with reduced down payment requirements (3%) for clients earning no
    more than the Area Median Income.
  • FHA:  Government-insured program with lower down
    payment (3.5%) and reduced credit history/score requirements (versus
    Traditional or Conforming Programs).
  • VA:  For certain US military veterans – 100%
    financing program backed by the Veteran’s Administration.
  • USDA:  100% financing for homes purchased in certain
    rural areas, backed by the Department of Agriculture.
  • State
    Bond Programs (e.g. THDA)

    down-payment assistance and forgivable grant programs sponsored at the
    state level, usually in conjunction with the FHA Program.
  • Community
    Reinvestment Act (CRA) Programs:
      Programs
    offered by banks to borrowers who earn less than the Area Median Income.  These programs have a variety of features
    that are specific to each lender. 

Additionally, borrowers who would otherwise qualify for a
Traditional Loan Product, but are purchasing properties located in lower income
communities may also benefit from one of these programs. 

Keep in mind, however, that these programs are only available to consumers who can demonstrate a prescribed level of creditworthiness and financial responsibility, as well as the ability to repay the loan. 

A mortgage loan is a financial risk to a lender and the agency that insures or guarantees its repayment.  Lower down payments, reduced credit requirements, lower incomes…all increase the risk of a loan to a lender, as well as the agency who guarantees it.  Each of these programs has their own means for mitigating that risk.  Some of these include Mortgage Insurance, Funding Fees, or Guarantee Fees, all of which may impact the long-term cost of the loan program.  Be sure to understand these before committing to a particular program.

So – where do you start? 
If you feel like an Affordable Mortgage Program may fit your needs – give
me a call and I’ll be happy to sit down with you and discuss the features and
benefits of each, and help you choose the one that may be best-suited for your
particular situation.

Tim Britt

Tim Britt is a Senior Mortgage Loan Officer (NMLS 1369718) with Fifth Third Bank in Brentwood, TN. He can be reached at 615-415-8887 or [email protected].

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What are the Benefits of Becoming a Homeowner?

What are the Benefits of Becoming a Homeowner?

What are the Benefits of Becoming a Homeowner?

Every family has a list of important dates. We celebrate birthdays, anniversaries, pet adoptions…and the list goes on. For 64.4 percent of households in the United States, this list includes the day they became a homeowner for the first time!

Why is this date important? Homeownership is not just a roof over your head! It represents shelter, stability, wealth, and pride! For decades, homeownership has been an important part of the American Dream!

However, many question if the next generations see the same benefits of homeownership as their predecessors.

In case we have forgotten, some of those benefits are:

Non-Financial Benefits

1) Educational Achievement: Homeownership has a positive impact on academic achievement, including reading and math performance in children 3-12 years old.

2) Civic Participation: “Owning a home means owning a part of the neighborhood.” Homeowners have a stronger connection to their neighborhood and are more committed to volunteer.

3) Health Benefits: Adjusting for a range of demographic, socioeconomic and housing-related characteristics, homeowners have a substantial health advantage over renters.

4) Public Assistance: The report shows 47% of homeowners use their home equity credit lines to help pay other debts, diminishing their need for public assistance.

5) Property Maintenance and Improvement: A well-maintained home not only generates benefits through consumption and safety, but a high-quality structure also raises mental health.

6) Pride of Ownership: This place is uniquely “yours.” You can customize it according to your likes and personality.

In addition to financial benefits, homeownership also brings significant social benefits. These not only pertain to the family, but extend to the communities, the state, and the country!

Financial Benefits

Buying a home is an investment in your future!

  1. Appreciation: On average, home prices are appreciating annually at a rate of 3.6%. This helps to create a safety net.
  2. Forced Savings: Your mortgage is like a forced savings plan! With each payment, you are reducing the principal of your loan.
  3. Home Equity: Homeownership builds equity every single month. You can later use that equity to start a business, send your children to college, etc.
  4. Net Worth: A homeowners’ net worth is 44x greater than renters! This gives you the financial freedom to invest.
  5. Stability: Rent prices increase 4% annually! A fixed mortgage payment allows you to save for future projects and guard against inflation.
  6. Tax Benefits: The government has created tax benefits to encourage customers to purchase. (Talk to your CPA to see which benefits apply to you).

Bottom Line

Homeownership is and will always be part of the American Dream! There are many financial and non-financial benefits to take advantage of when owning a home. If owning a home is part of your dream, contact us to help you with the process!

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Are You a First-Time Homebuyer?

Are You a First-Time Homebuyer?

Are You a First-Time Homebuyer?

Guest Post by Tim Britt

Purchasing a home can be a daunting endeavor, even for those who may have done it many times previously. Home ownership can represent so many different things to individuals and families; depending on the particular stage of life they’re in. For those embarking on this journey for the first time, I thought I’d share a few tips and things to consider as you begin the process. Even those who may have previously done so may find some of this information helpful.

In 1989, Steven Covey published a ground-breaking book titled The 7 Habits of Highly Effective People. In it, he outlines habits that, when practiced in most any area of life, can often produce better results. A couple of his ideas come to mind as it relates to purchasing a new home and I want to share how they may be helpful…particularly, if this is the first time!

Begin With The End In Mind. I always ask my clients “what are your goals and dreams associated with this home purchase?” Or…”what will life look like in 5 years from now for you/your family?” While some will answer right away with “…this is a starter home for us;” or “…we want our children to go to a specific school;” some haven’t really thought about home ownership in those terms. From my perspective, I want to know this so I can help them choose the best loan program that will help them fulfill their goals. Here are some typical questions First-Time Homebuyers may want to ponder as it relates to financing a home purchase:

  • Why do we really want to buy a home?
  • How long do we plan to live in this home?
  • How does a mortgage fit into our current budget?
  • What are the “other” costs of home ownership… beyond the monthly payment?

There may be several “ends” associated with the purchase of a home.  The first may be Closing Day!  The last one may be the day you decide to sell it!  There could be many in-between…such as starting a family or launching a home-based business.  Whatever they are…I encourage folks to be thoughtful!  Knowing what those “ends” are can be helpful in articulating your “why!”

First Things First!  The idea behind this habit is to prioritize the activities related to shopping and purchasing a home in a manner that puts the most urgent and important ones at the beginning!  While it may be exciting to jump on a real estate website and start browsing listings right away to find that “dream home,” there’s a danger of creating an emotional attachment to a beautiful home, only to discover that it doesn’t fit into your budget, family needs, goals, or…isn’t even available for sale any longer.  Here are a few suggested “First Things” for new homebuyers:

  • Know your budget: monthly payment, cash available for the purchase, as well as ongoing (future) maintenance costs.
  • Know your needs (vs your wants): establish the things that the home must have in order to accomplish your goals for purchasing.
  • Know your “why:” be able to articulate exactly why you want to buy a home. For some families…it may be related to a school choice.  For others, it’s proximity to job, family or other factors.  There is no “wrong” answer…just know your own “why!”

Finally, choose trusted advisors to guide you along the way.  The 2 most important advisors to identify early in home buying process are a licensed Realtor and a Mortgage Lender.  Since a home purchase represents both the largest asset and largest debt most families will ever incur, the guidance and professional advice from a trusted Realtor and Lender will be invaluable.  When they get to know you and understand your particular “why,” they can help you choose the best home and financing options to meet your individual needs.

Tim Britt Supreme Lending

 

 

Tim Britt is a Senior Mortgage Loan Officer (NMLS 1369718) with Fifth Third Bank in Brentwood, TN. He can be reached at 615-415-8887 or [email protected]. The statements or opinions expressed are his own and do not necessarily represent those of Fifth Third Bank.

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