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

Median-Priced Homes: What You Can Buy Right Now for $232,000

Given the hype over skyrocketing home prices these days, here’s a fact that might come as a bit of a surprise: the national median home price is a reasonably affordable $232,000 in June, according to realtor.com® data.

“The median price is still affordable for the median-income household in the U.S., but just barely,” according to Jonathan Smoke, our chief economist. Why just barely? “List prices—and affordability—vary greatly around the country” explains Smoke. “That price won’t get you in the front door in San Francisco, but it will provide a greater-than-typical home in more inexpensive places likePittsburgh or Cleveland.”

Bottom lime: if you’re willing to expand your horizons and make your way to an emerging locale, you can end up with an affordable prize.

So how does that translate in the real world? Here’s a selection of what $232,000 will get you from around the country:

Address: 11317 Lady Slipper Ln, Richmond, VA

What you get: This “classic colonial” from 1984 comes with classy updates that include an eat-in kitchen with tile flooring, quartz countertops, and maple cabinetry.

Address: 2352 Conners Creek Cir Knoxville, TN

What you get: “A great buy,” boasts the listing. We agree. The charming, red-brick, three-bedroom Colonial built in 1994 is “move-in ready” and comes with three bedrooms and a bonus room.

 

Address: 16199 N 182nd Ln Surprise, AZ

What you get: Solar panels and low-upkeep landscaping mean it’s easy to be green. The four-bedroom home includes 10-foot-high ceilings, tile flooring, and sweet outdoor space.

Address: 412 Toura Dr, Pleasant Hills, PA

What you get: This grand-looking, two-level Tudor features four bedrooms, an updated kitchen, plus a fenced yard for Fido.

Address: 67 Fairfield St, Springfield, MA

What you get: This adorable abode built in 1905 has been updated while maintaining its Victorian charm. Standout details include an eat-in kitchen, hardwood floors, pocket doors, and a renovated bath with a claw-foot tub.

Address: 1322 Glen Ave Colorado Springs, CO

What you get: Character in Colorado. Built in 1903, this home has been renovated and features a freestanding fireplace, wood floors, a back deck, and a pond.

Address: 350 N 24th Ave Yakima, WA

What you get: Colonial-style buildings even made it out West. This 1925 beaut is so welcoming you’ll want to move in at first sight. Who can resist a white picket fence? Inside there’s hardwood flooring, a sunroom, a family room with fireplace, and an upstairs landing with built-in bookshelves.

Address: 520 Ivy St Grass Valley, CA

What you get: You’ll feel like you struck it rich with this home, which is located in a historic gold-mining town. Period details include a gas parlor stove, hardwood floors, and a covered porch.

Posted by Claudine Zap on realtor.com

Everything You Need to Know About Jumbo Mortgages

Jumbo mortgages are more flexible than many home buyers realize, and typically have lower rates than most other available mortgages today. The guide below will help you understand what a jumbo loan is, and whether it’s right for your financial situation.

African elephant female and her baby elephant balancing on a blue balls.; Shutterstock ID 169100474; PO: Cat Overman; Job: blog post

African elephant female and her baby elephant balancing on a blue balls.; Shutterstock ID 169100474; PO: Cat Overman; Job: blog post

Origin of the term “jumbo mortgage”

Jumbo mortgages are also called non-conforming mortgages. These are loans that lenders make when a borrower doesn’t “conform” to the guidelines of Fannie Mae and Freddie Mac. Created by Congress in 1938 and 1970, respectively, Fannie Mae and Freddie Mac provide stability and affordability to the mortgage market by buying “conforming” mortgages from lenders, giving lenders liquidity to make more mortgages.

Fannie and Freddie only buy mortgages meeting their guidelines for down payment, credit score, post-closing reserves and, of course, loan size.

In 2015, the conforming loan size limit is $417,000 nationwide, with exceptions as high as $625,500 in certain high-priced markets.

Loans greater than these limits are usually called jumbo mortgages or non-conforming mortgages.

Jumbo rates lower than conforming rates

Historically, non-conforming loans had rates at least 0.25 percent higher than conforming loans because lenders were perceived as taking more risk making non-conforming loans that couldn’t be sold to government-backed Fannie Mae and Freddie Mac, and this risk translated into higher consumer rates.

However, a conforming/non-conforming rate paradox has been in effect the past two years, making non-conforming loan rates lower than conforming rates.

Conforming rates haven’t fallen materially because investors in mortgage bonds that underpin Fannie/Freddie conforming loans have been betting that the U.S. economy is slowly improving. Meanwhile the economy hasn’t improved enough for the Federal Reserve to hike the rates that ultimately impact how much banks must pay to depositors. So banks currently pay less to depositors, and can therefore offer lower rates on non-conforming loans.

The result of this (greatly simplified) market dynamic is that non-conforming rates have been about 0.25 percent lower than conforming rates for the past two years.

Jumbo approvals have gotten easier

In addition to non-conforming rates being lower, non-conforming loan approvals have some flexibility that conforming loans don’t have:

  • Less than 20 percent down with no mortgage insurance. Down payments on non-conforming loans have become more flexible, and can now be as little as 10-percent down for loan amounts of $1 million and sometimes higher, translating into a $1.1 million purchase price or higher. Unlike conforming loans, these low-down jumbo programs don’t require mortgage insurance. The tradeoff for this flexibility is that most lenders will offer a rate that’s 0.25-percent higher and require 30- to 36-percent debt-to-income ratios for these low-down jumbos.
  • Higher debt-to-income ratio. For anything 20 percent down or greater, lenders will verify that your total monthly housing payment plus all other monthly bills doesn’t exceed 43 percent of your income. This is a hard limit on conforming loans, but there can be some flexibility on non-conforming loans. For example, if you documented substantial savings left over after the loan closed, you might be able to get a non-conforming loan with a debt-to-income ratio of 46 percent.
  • Flexible income calculations. Non-conforming income calculations can be more logical than conforming. For example, if you were in the same industry for 15 years and recently started your own business in that industry, a conforming loan would require you to show two years of filed self-employed tax returns. A non-conforming loan might only require one year of filed returns if you could demonstrate that the business was stable or growing.
  • Credit scores. The requirements are about the same for conforming and non-conforming. A credit score down to 680 generally gets you most available loan options, albeit with a higher rate than you’d get with a top-tier credit score of 780 or greater.
  • Money left over after loan closing. This is often called reserves or post-closing liquidity. Non-conforming loans will be more stringent than conforming. Typically, lenders want to see 12 months of reserves after the close, half liquid (in a checking or savings account) and half calculated from retirement assets — compared to about six months’ reserves for conforming. Non-conforming exceptions are available if your debt-to-income ratio is low and your down payment is high.

Lower your payment as you pay down your loan

Some large banks that keep their jumbo loans (instead of selling the loans after they close) have begun offering a re-amortization feature on jumbo loans over $417,000. Re-amortization means that your payment will decrease as you pay your loan down. Depending on the lender, a loan balance pay-down from $5,000 to $20,000 will trigger a payment recalculation. This feature enables higher earners to lower their monthly budget as they chip away at their loan balance using extra income such as bonuses or stock compensation.

6 Reasons Baby Boomers Should Consider Downsizing

Now that you’ve grown up and moved out, it might be time for your parents to start thinking about moving on too.

Did you know that boomers will turn 65 at a rate of about 8,000 a day for the next 18 years? That’s a lot of American homeowners who are reaching retirement age and starting to think about their next phase in life.

If your parents fall into this category, it could be a good time to consider leaving that large family home behind. Downsizing can help aging parents enjoy their newfound freedom.

Here are six enticing advantages to living the “less is more” lifestyle once the kids have left the nest.

1. Smaller house = smaller mortgage

Generally a smaller home can translate into a smaller monthly mortgage payment. When you’ve lived in your large family home for many years and built up sizable home equity, you may be able to cash out and purchase a new smaller, less-expensive home — even possibly eliminating a mortgage payment entirely.

Want to see what’s out there? Use Trulia’s home search to look for homes by square footage.

2. Reduced monthly expenses

Downsizing your home also downsizes your monthly costs. Utility bills may shrink, taxes and insurance may be reduced, and general upkeep and maintenance should be more affordable.

3. Shed the burden of home upkeep

Moving to a smaller, more affordable home also provides a fantastic opportunity to ditch the snow shovel and slap on some sunscreen. If you take the opportunity to move somewhere with year-round sunshine, your days of raising a family in the cold winters of the Midwest and Northeast could become a distant frozen memory. And even if you choose to stay put in a climate with four seasons, moving to a townhome can mean no more mowing if your community takes care of the landscaping.

4. More affordable town

Downsizing is a great opportunity to move to a less expensive metro area. Finding a city that gives you more “bang for your buck” is a big boon to retirees and empty nesters who will need to adjust to life on a fixed income.

In a hot retirement market like West Palm Beach, FL, the median sales price on a home is $155,000 and the cost of living is affordable. Compare that with a family- and industry-friendly metro like the Chicago suburb of Naperville, IL, where the median sales price is $355,000 and cost-of-living expenses are generally higher. (Both figures are current as of the week ending July 1, 2015.) You’ll find that costs can shrink in towns where affordability is in alignment with real estate prices.

5. Lifestyle upgrade

Empty nesters usually have a bit more time for themselves. In the process of downsizing, you have the opportunity to relocate closer to all the new lifestyle amenities you’ll want to enjoy.

Is it golf, tennis, biking, and other outdoor activities? Or do you prefer life in the city, with restaurants, theater, shopping, and cultural activities all within walking distance? Downsizing allows you to live closer to the lifestyle you want — and hopefully, you’ll have a bit of monthly cash left over to enjoy it!

6. Less stuff = more life

There’s something intangible about downsizing and getting rid of all that “stuff.” As you simplify your home, you simplify your life. Invest the time needed to clean out and edit your possessions, and you’ll create a lifestyle that functions better and is easier to maintain. Talk about a win-win!

Posted by Michael Corbett on Trulia

How to Find Your Dream Home

Ready to start searching listings and hitting open houses? Save yourself some time by first identifying exactly what you need and want in a home.

You’ve been pre-approved and know what you can afford, so it’s time to start home shopping. But the hunt for your dream home will stall rapidly if you don’t know what that “dream” looks like.

It’s easy to talk in generalities about wanting a “big” house or an “older” home. But in order to better target your real estate search, you must think specifically about your dream dwelling. Will your “big” house be 2,400 square feet or 5,000? When you say “older” home, do you mean one built pre-1900, or pre-1980?

Before you visit another open house, sit down and make a list of your needs and wants — and yes, those are two different things. You may want a pool, but you probably could live without it. (Plus, it’s worth considering that having a pool could raise your home insurance costs.)

Understand that your requirements list will likely change as you learn more about your housing options. Proximity to the beach may start as a priority, for example, but once you see the size of ocean-front homes you can get in your price range, you may decide a short drive to the water is quite bearable. Unless you have an unlimited budget, it’s likely you’ll need to make compromises along the way.

Use these questions to help make your very own list of housing requirements.

You should also take time to rank each of these home qualities as “Must Have,” “Like to Have” or “Don’t Care” using the checklist below. Identifying your priorities will help you find the perfect property.

Once you know what you’re looking for in a home, you’ll be ready to find the right agent to partner with for your search.

Posted by Mary Boone on Zillow

4 Reasons to Buy NOW!

Summer is here! The temperature isn’t the only thing heating up right now, so too is the housing market! Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects appreciation in home values over the next five years to be between 11.8% (most pessimistic) and 26.7% (most optimistic).

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have started to inch up, most experts predict that they will begin to rise even more over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison projecting that rates will be up approximately three quarters of a percentage point over the next 12 months.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But, what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Posted by The KCM Crew in Keeping Current Matters