61% of First-Time Buyers Put Down Less than 6%

According to the National Association of Realtors’ latest Realtors Confidence Index, 61% of first-time homebuyers purchased their homes with down payments below 6% from October 2016 through November 2017.

Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying. The median down payment for all buyers in 2017 was just 10% and that percentage drops to 6% for first-time buyers.

Zillow Senior Economist Aaron Terrazas’ recent comments shed light on why buyer demand has remained strong,

“Looking into 2018, rent is expected to continue gaining. More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead.”

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 who is not sure if you would qualify for a low-down payment mortgage, let’s get together and set you on your path to homeownership!

 

Posted by The KCM Crew

Ready to find your next home? Click HERE to talk with one of our agents today!

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What is the Cost of Waiting Until Next Year to Buy?

We recently shared that over the course of the last 12 months, home prices have appreciated by 7.0%. Over the same amount of time, interest rates have remained historically low which has allowed many buyers to enter the market.

As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 4.7% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 4.7% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

Bottom Line

If buying a home is in your plan for 2018, doing it sooner rather than later could save you thousands of dollars over the terms of your loan.

 

Posted by The KCM Crew

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

Some Highlights:

  • Realtor.com shared their “5 Habits to Start Now If You Hope to Buy a Home.”
  • Setting up an automatic savings plan that saves a small amount of every check is one of the best ways to save without thinking a lot about it.
  • Living within a budget will not only help you save money for down payments but will help you pay down other debts that might be holding you back.

 

Posted by The KCM Crew

Are you ready to buy? Visit our website to get started today!

6 Big Ways to Completely Botch Buying a Home

mevans/iStock; realtor.com

We all make careless mistakes. We accidentally undertip the waiter. We lock our keys in the car. We wear white after Labor Day. We press “send all.” It happens to the best of us.

But some little mistakes can create big problems, like when you’re buying a home.

A house, after all, is a huge purchase; the stakes are extremely high. With that kind of money on the line, you’d better be darn sure you can navigate the home-buying process without a hitch. And avoid self-sabotage!

To help you out, we’ve pinpointed six common ways home buyers botch their property-purchasing prospects so you can sidestep these snafus at all costs.

1. Flying solo

If this isn’t your first time on the home-buying merry-go-round, you might think: Why hire a real estate agent to hold your hand? Well, first, let us remind you: It’s generally free to use a buyer’s agent, because the seller typically pays the commission for both the seller’s agent and the buyer’s agent. And whether it’s your first home or your fifth, you probably want a professional to help guide you through the often-tricky process of writing an offer, negotiating with the seller, and making sure the deal is up to snuff.

Without an agent, you’ll soon be drowning in paperwork and at risk of making a whole bunch of costly mistakes, warns Jennifer Baxter, associate broker at Coldwell Banker RMR in Suwanee, GA.

To find a real estate agent in your area, use online tools such as realtor.com®’s Find a Realtor search, which will give you useful info such as the Realtor®’s number of years of job experience, number of homes sold, and the price of homes typically dealt with.

2. Saying too much—and undercutting your negotiating power

Be careful what you say when you’re viewing a property at an open house or home showing, Baxter warns. For instance, if the listing agent hears you say to your spouse, “I love this house, and it’s way under our budget,” the seller might try to play hardball when you try to negotiate on price. Keep private conversations private.

3. Waiting too long to make your earnest money deposit

The sales contract will specifically state when you need to cough up the earnest money deposit, which is cash you provide upfront to show the seller that you’re serious about buying the property (the typical amount is 3% to 5% of the sales price of the house).

How much time you have to provide the deposit can vary by state. For example, in Virginia the deposit must occur within five business banking days after ratification unless otherwise agreed to in writing by both parties.

“If you don’t turn in the EMD in accordance with the contract, the contract is void,” says Baxter.

Read: You can kiss the home goodbye if you dillydally for too long.

4. Not bothering to read property disclosures

Even if you plan on having a home inspection, you should still read the home seller’s property disclosures in full, advises Seth Lejeune, a real estate agent with Berkshire Hathaway in Collegeville, PA.

“Property disclosures can be long, but that’s where you’re going to find whether the seller knows if there are any pre-existing issues with the house,” Lejeune says.

Most home buyers will receive a property disclosure statement after their offer has been accepted, says Atlanta real estate agent Bill Golden.

Look for major issues like a faulty foundation, leaky roof, HVAC issues, or pest or mold infestations. If you spot something on a disclosure statement that you don’t understand or that raises concerns, have your real estate agent bring it up with the listing agent. The seller might have an explanation that puts you at ease (e.g., “We had bedbugs back in 2012 but hired an exterminator and have been free and clear ever since”). But if the issue makes you seriously question whether you want to move forward, this could be an opportunity to renegotiate the sales price to compensate for the added risk you’re taking on buying this home.

5. Damaging your credit score while you’re under contract

Unless you’re buying a house with all cash, you mortgage still has to go through underwriting to get approved. Since this process typically happens shortly before closing, you don’t want to do anything while you’re in contract that’s going to hurt your credit score. That includes buying a car, boat, or any other large purchase that has to be financed.

One less obvious mistake, however, is applying for a new credit card. Doing so—even for a store credit card like Target’s or Macy’s—triggers a hard inquiry on your credit report, which can ding your score by up to 5 points, says Beverly Harzog, a consumer credit expert and author of “The Debt Escape Plan.” That might sound like a small hit, but it could make a big difference if you’re on the cusp of qualifying for a mortgage.

6. Trusting a verbal agreement

“Some home buyers don’t realize the importance of putting everything in writing,” says Baxter. Unfortunately, that can come back to bite you, hard. For instance, let’s say a seller promises he’ll replace the water heater before closing. Well, if it’s not agreed upon in writing, the seller isn’t required to do it.

“I see this issue come up a lot when people buy new construction” and don’t use a buyer’s agent, says Baxter. “The builder’s agent is always looking out for the builder’s interests.”

This is another reason why you should work with a buyer’s agent rather than trying to muddle through this alone.

 

Posted by Daniel Bortz on realtor.com

Click HERE to start your search today!!

The Mortgage Process: What You Need to Know [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.

Posted by The KCM Crew

Wants and Needs of Buyers

The wish list of today’s home buyer is long, but flexible—and includes both home features and neighborhood characteristics. Neighborhood safety and finding a home within their initial price range are the two features that buyers most frequently require, at 71 percent and 67 percent, respectively.

Beyond price, buyers are most concerned with finding a home that fits the daily needs of their household. Most buyers require that their home have air conditioning (62 percent of buyers), their preferred number of bedrooms (62 percent), and their preferred number of bathrooms (53 percent).

Kitchens, Energy Efficiency Most Desirable Home Features

Nice-to-have features—those deemed not a requirement, but highly desirable—highlight increasing trends toward sustainability and customization. Topping the list, close to 1 in 2 buyers (48 percent) list energy efficiency and preferred style of kitchen (also 48 percent of buyers) as desired home characteristics. Preferred finishes (e.g., flooring, countertops and appliances) follow closely at 47 percent.

Safety, Parking Top Neighborhood Requirements

Home features are not the only factors that influence home buyers’ decision-making; neighborhood characteristics are important, too. In addition to requiring that the home is in a safe neighborhood, a sizeable share of buyers require that the home has ample parking (40 percent) and is located in their preferred neighborhood (39 percent).

Air Conditioning More Important Than Decks, Patios and Yards

Staying cool indoors is clearly more important to buyers than enjoying the perks of outdoor space, with air conditioning among buyers’ four most essential home features. In fact, a larger share (62 percent) of buyers list air conditioning as an important feature in their new home than those who view private outdoor space, like a patio, deck or yard, as essential (48 percent of buyers place importance on outdoor space).

Luckily, air conditioning is an amenity already common in most American homes; today, about 65 percent of all homes in the United States have central air conditioning, and an additional 27 percent of homes have individual air-conditioning units.20 But for markets where air conditioning isn’t as prevalent in homes, such as in the West, air conditioning is an increasingly sought-after feature for home buyers of all demographics and generations. This is due, in part, to the rising number of days with temperatures over 65F, particularly in California, Nevada and New Mexico, according to the Environmental Protection Agency.21

In warm climates, rising incomes are another factor; one recent study conducted by researchers from UC-Berkeley and the National Bureau of Economic Research22 found that for every additional $1,000 of household income, air conditioner adoption increases 3 percentage points. This is not surprising, given that air conditioning is a luxury often associated with additional utility and maintenance costs.

The Suburban Dream Is All About Bathrooms

Bathrooms play a fundamental role in the home-buying process for suburban buyers. More than half (58 percent) of suburban buyers say it is a requirement that a home has their preferred number of bathrooms (compared with 52 percent of rural and 47 percent of urban buyers). The explanation for this trend is pretty simple: Generation X households (those aged 38-52) are more likely to live in the suburbs and to have children under the age of 18 at home (62 percent of Generation X buyers have young children, compared with 53 percent of Millennial and 16 percent of Baby Boomer buyers). As their children grow from toddlers to teenagers, having an extra bathroom or two quickly goes from a “nice-to-have” to a “necessity.”

Likely for many of the same reasons, Generation X buyers place more requirements around the size of their home in general than the average buyer. Generation X buyers require that their home have their preferred number of bathrooms (59 percent vs. 53 percent for all buyers), preferred number of bedrooms (70 percent vs. 62 percent for all buyers), and preferred home size or square footage (52 percent vs. 47 percent of all buyers).

Location, Location, Location

Location has always been a primary factor in the home-buying process, and it’s no different for today’s buyer. Buyers are craving an optimal spot when searching for the perfect home, whether it be in their preferred neighborhood (80 percent list this as a requirement or desired characteristic); a location close to family and friends (68 percent list as a requirement or desire); near shopping, services and other leisure activities (78 percent list as a requirement or desire); or close to work (69 percent list as a requirement or desire).

For Millennial and Generation X buyers, the location of the home must check all the boxes. This includes requiring or desiring a home that is close to work (81 percent of Millennial and 75 percent of Generation X, compared with 50 percent of Baby Boomer and 31 percent of Silent Generation buyers), and close to family and friends (72 percent of Millennial and 66 percent of Generation X, compared with 63 percent of Baby Boomer and 59 percent of Silent Generation buyers).

Living Close to Family, Friends Is a Requirement for Some

Looking for a home close to family and friends is also more of a requirement for different ethnic groups: Hispanic/Latino (29 percent) and Caucasian/white (28 percent) buyers are more likely to require being close to family and friends (compared with 17 percent of African-American/black and 18 percent of Asian/Pacific Islander buyers).

Proximity to Work a Requirement for Many

Nearly half (45 percent) of buyers want to be close to public transportation, and almost 7 in 10 (69 percent) require or desire proximity to work. This is especially true among younger generations and those living in larger cities, where traffic is likely heavier and public transportation is a key part of a commute. Specifically, 33 percent of urban buyers require their home to be close to work (compared with 28 percent of suburban and 21 percent of rural buyers), and 31 percent look for a home close to public transportation (in contrast to 13 percent of suburban and 10 percent of rural buyers).

“Nearly half (45 percent) of buyers want to be close to public transportation…”

Because many Millennials buy in urban areas, it follows that they are also the most likely to not only desire easy access to public transportation, but to list it as a requirement (24 percent, compared with 18 percent of total buyers).

Being close to mass transit is seen as a requirement more often by Hispanic/Latino (26 percent) and African-American/black (25 percent) buyers than Asian/Pacific Islander (17 percent) or Caucasian/white (16 percent) buyers. This could be due to these two groups’ increased likelihood to buy in urban areas, where transit is prevalent. Hispanic/Latino buyers purchase in urban areas at 47 percent, African-American/black buyers at 43 percent, and Asian/Pacific Islander buyers at 38 percent, compared with just 28 percent of Caucasian/white buyers.

Younger Buyers Seek Out Schools

It’s no surprise that more than a third of Generation X and Millennial buyers require that their home be in their preferred school district (36 percent and 34 percent, respectively), since these two groups are the most likely to have children in the household. Fifty-seven percent of buyers under the age of 53 have children under the age of 18 at home, compared with 13 percent of buyers over the age of 53. For comparison, just 16 percent of Baby Boomer and 6 percent of Silent Generation buyers require that their home is located in their preferred school district.

Safety Is Key for Suburbanites

Being in a safe neighborhood is a priority for almost all buyers, regardless of whether they live in an urban, suburban or rural area. Suburban buyers, however, are more concerned with safety than their urban and rural counterparts (78 percent, compared with 59 percent of urban buyers and 70 percent of rural buyers).

Unsurprisingly, a safe neighborhood becomes even more critical when children are involved. Seventy-four percent of households with children indicate safety as a requirement, versus 68 percent of households without kids.

Over Half Consider New Construction Homes

Over half (52 percent) of buyers consider new construction homes. Buyers are drawn to new homes because of their desirable location (43 percent), appealing features (39 percent), and the fact that everything in the home is new (35 percent). Higher-income buyers are most likely to consider purchasing newly built homes (65 percent of buyers earning $100,000 or more annually consider them, vs. 45 percent of buyers earning less than $100,000 a year).

Many Consider Distressed, Non-Traditional Homes

As buyers attempt to balance their desires against their budget, some look outside traditional for-sale homes and consider distressed or non-traditional home purchases as another option. Thirty-six percent of buyers consider a foreclosure, 34 percent consider a short-sale home, 22 percent consider buying a home at an auction and 27 percent look at buying a lot/land with no existing home on-site.

Buyers in the Northeast and West are significantly more likely to consider buying a home at auction (27 percent in each region, compared with 22 percent of total buyers). This is likely due to low for-sale inventory in Northeastern and Western urban areas. Buyers in these highly competitive areas are understandably looking at alternative methods for finding something they can afford in the area where they want to live.

Buyers drawn to non-traditional home sales for the short-term savings on list price often end up spending more on repairs. While fixer-upper homes generally list for 8 percent less than market value, the money saved on the home purchase doesn’t go far. That 8 percent—or roughly $11,000 saved—generally won’t be enough to make the repairs needed on the home, especially if they’re anything more than cosmetic.23

 

Read more in the Zillow Group Consumer Housing Trends Report 2017

Click HERE to begin your home search!

How Fast Can You Save for a 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 you 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 a 2-bedroom apartment 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 Iowa can save for a down payment the quickest in just under 2 years (1.99). Below is a map 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 attainable in a year or two in many states as shown in the map below.

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! Meet with a local real estate professional who can help you evaluate your ability to buy today.

 

Posted by The KCM Crew