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 non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.
This brings us to two major misconceptions that we want to address today.
NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with a down payment 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.
An Ipson 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 of approved conventional and FHA mortgages are much lower.
The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724. The chart below shows the distribution of FICO® Scores for all loans approved in August.
If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.
Let’s say you just signed the contract to purchase a house and it’s time to send the down payment. You instruct your bank to wire the money to a bank account provided to you by your real estate agent's email. But later you discover your money has vanished.
According to the National Association of Realtors, this nightmare scenario is occurring with increasing frequency through an email hacking scam. Down payments of as much as $100,000 have disappeared.
According to the Federal Trade Commission, hackers infiltrate a real estate agent’s email account, allowing them to track the progress of closing transactions, hus learning details about the property, title company being used, time and date of closing, amount of escrow funds and more.
When it’s time for you to post earnest money or a down payment, the scammers use your agent’s email account to send you instructions about how much to wire and where to send the funds. Knowing the transaction details, they are able to appear credible. They grab the cash and move the money offshore, where it can’t be traced.
What can you do? Do not act on wiring instructions sent via email. Get necessary instructions from your agent face-to-face or by telephone.
This article originally appeared in Inside personal Finance, April 2017.
This time of year, many people eagerly check their mailboxes looking for their tax return check from the IRS. But, what do most people plan to do with the money? GO Banking Rates recently surveyed Americans and asked the question - “What do you plan on doing with your tax refund?”
The results of the survey were interesting. Here is what they plan to do with their money:
Upon seeing the research, The National Association of Realtors (NAR) wondered if this could help with a constant challenge cited by many people who wish to purchase a home – saving for the down payment.
In a recent post in NAR’s Economists’ Outlook Blog, they explained:
“With a sizable tax refund, the average American would have a decent down payment depending on which region or market you live in.”
They went on to add:
“[A]pproximately 5 percent of all respondents indicated they would make a major purchase which does not seem like a lot. However, there is a bigger group 41 percent who see saving the tax return is best and that group could be potential homebuyers if they are not already.”
In other words, putting that money toward purchasing a home is a form of savings.
When one considers that first-time home buyers in 2016 had an average down payment of 6%, a decent tax return could go a long way toward the necessary funds needed for a down payment on a house. Or perhaps, the down payment needed by a son or daughter to make their homeownership dream a reality. How are you going to spend your return?
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 would it 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 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.
Whether you have just started to save for a down payment, or have been saving for years, you may be closer to your dream home than you think! Let's meet up so I can help you evaluate your ability to buy today.
Again… You Do Not Need 20% Down to Buy NOW!
A survey by Ipsos 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. There are two major misconceptions that we want to address today.
The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 40% of consumers think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less.
The survey also 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 of approved conventional and FHA mortgages are much lower.
The average conventional loan closed in February had a credit score of 752, while FHA mortgages closed with a score of 686. The average across all loans closed in February was 720. The chart below shows the distribution of FICO® Scores for all loans approved in February.