For many first-time buyers, saving for a down payment is the most difficult step in the home-buying process. However, it’s a common misconception that you need 20 percent down to buy a home.
Actually, lenders across the country offer mortgage products with very affordable down payments — some as low as 3 percent.
Owning a home has always been a key component of the American Dream; in fact, many surveys show that 65 percent of Millennials agree that homeownership and the American Dream go hand-in-hand. Home ownership also comes with several benefits like building equity, receiving annual tax deductions and becoming more engaged with the local community. It serves as a stepping stone for long-term wealth creation, too. Historically, first-time buyers have represented 40 percent of all home purchasers, but today they make up about 30 percent, according to the National Association of Realtors. Down payment misconceptions could be to blame.
“It’s safe to say that most first-time buyers aren’t aware that there are reasonable loan options available that require less money down,” says Geoff Lewis, president of RE/MAX, LLC. “Choosing an option with a smaller down payment can make it possible for potential buyers to enjoy the benefits of homeownership sooner.”
Most popular low down payment options
* FHA Loans — Traditionally the mortgage of choice for first-time buyers, the Federal Housing Administration (FHA), offers government-insured loans with as little as 3.5 percent down. The most popular FHA loan option, the 203(b), is widely available from lenders across the country. You may qualify with a credit score of just 500, although there may be limitations on some condo purchases.
* Home Possible from Freddie Mac — This program allows you to put between 3 and 5 percent down, as long as you intend to use the purchased house as your primary residence, and don’t currently own or share ownership of another house. You’ll also need to complete a required homeownership education program online.
* Conventional 97 from Fannie Mae — Just 3 percent down is enough to help you qualify for a Conventional 97, as long as you’re applying for a fixed-rate mortgage on a single-family home that’s less than $417,000. You’ll also need to participate in a homeownership education program, and at least one of the purchasers applying for the loan must be a first-time buyer.
* HomeReady from Fannie Mae — Another option that requires as little as 3 percent down, HomeReady can offer below-market interest rates. This program also allows non-occupant borrowers to apply; for example, parents can secure this type of loan for a young adult, who’s just starting to establish credit.
In addition to these mortgage options, there are also a variety of down payment assistance programs that may be available through your state or lender. Today, many loan programs allow for down-payment funds to come from third party sources, like cash gifts from relatives.
Buying a home with a smaller down payment has distinct advantages too. You’re less likely to become “house poor,” which can happen when you spend the majority of your total savings on home ownership, leaving little cash in reserve for unforeseen emergencies or desirable home improvements.
Something to keep in mind when considering your loan options: putting less than 20 percent down can also result in the additional monthly cost of Private Mortgage Insurance (PMI). However, if your home value is appreciating, PMI can be eliminated in a few years through refinancing.
“Homeownership isn’t reserved just for people who can afford a large down payment. Mortgages that offer an option for less cash down are making it possible for many to enjoy the American Dream,” Lewis says. “Mortgages are like any other product, you have to shop around to find the one that works best for you. Lenders and real estate agents can give you a good idea of what your choices are.”
The seller has accepted your offer, the inspector didn’t find any underground streams or shaky foundations, and the closing date is set. You’re in the homestretch! While you can breathe a little easier, remember, the deal’s not done until everyone signs all the (zillion) documents at the closing table. And, your lender can still change their mind. Here are some things to avoid in the run-up to the big day.
1. Don’t mess with your income-to-debt ratio
The ratio of your monthly income to your monthly debts is one of the main factors the lender considered when qualifying you. And your lender will probably run your financials two or three more times before closing. While it’s tempting, don’t take out a big loan for the new deck you want to install when you move into your new place. Don’t sign the lease on the new Audi that will look perfect in your new driveway. The bank looks at lease payments like any other debt payment.
2. Don’t disappear
Be sure to keep in touch with your lender and be readily available to immediately address any last-minute concerns.
3. Don’t change jobs
Lenders love stability. Switching jobs right before closing can make them anxious, and you want to give them every reason to feel confident. Most lenders prefer to have a two-year job history in hand, so making a big career move could slow things down, or squash the deal entirely.
4. Don’t open new credit cards
Yes, you’ll be buying furniture to fill those lovely rooms. Yes, you might need a new fridge. And yes, new dishes to match the new kitchen would be splendid. But resist the lure of opening new credit cards until after closing. Doing so can affect your credit score. For now, just open catalogs.
5. Don’t be late
Even though you may have been riding the real estate roller coaster and life’s been chaotic, be sure to stay current with all bill payments. Late payments, too, can affect that all-important credit score.
Combine innovative search features with an interactive platform, add on a nationally recognized brand and what do you get? A powerhouse website with more consumer traffic than any other real estate franchise.
Orlando continues to lead the state in job creation. Since January, the Orlando region added 49,000 new private-sector jobs, the highest number of any Florida metro area, according to numbers by the Florida Department of Economic Opportunity.
Additionally, Orlando’s unemployment rate decreased by 0.7 percent from the previous year to 4.5 percent. This rate ties for the second lowest unemployment rate among all Metropolitan Statistical Areas (MSAs) in the state.
Orlando — the most visited destination in the nation as well as the number one region for both job and population growth — has been recognized as one of the and world-class brands.
Featured in the current summer issue of Worth magazine, Orlando is one of 15 “Worth Destinations” recognized for exceptional quality of life, tourism offerings, cultural offerings, business climate, entrepreneurial community and civic leadership.
“Over the past year, working with academics, experts and my editorial colleagues at Worth, we looked across the U.S. to identify and analyze the most dynamic cities,” says Richard Bradley, Worth’s editor in chief and chief content officer. “Orlando continued to rise to the top due to a quality of life that is a unique blend of three factors. It has well-established appeal as a tourism and entertainment powerhouse, a growing cultural scene and booming tech and new business development.”
“Already we’re known as the premier destination for first-class family entertainment, offering the best family-friendly offerings in the world, including luxury dining, shopping and accommodations,” said Orange County Mayor Teresa Jacobs. “As the Worth destination designation indicates, our rich tourism offerings blend seamlessly with our entrepreneurial business environment to create a region that is innovative and inspiring for visitors and residents alike.”
“We are honored to be selected as one of Worth’s Most Dynamic Cities,” said Orlando Mayor Buddy Dyer. “Orlando is known worldwide as a great place to visit, and this recognition also validates that we are also a great place to live and do business. It is a testament to our talented workforce, robust entrepreneurial ecosystem, business-friendly environment and high quality of life – all of which is created through a unique blend of business and tourism leadership.”
Worth Destinations is the authoritative list of America’s most dynamic cities, chosen for their quality of life and thriving entrepreneurial, economic, tourism, cultural and civic activity. Worth Destinations is a yearlong editorial exploration that will include 12 months of coverage on each of the Worth Destinations via digital, radio, broadcast and live-event channels.
Look at the country’s most prolific agents and you’ll find that more are with REMAX than any other brand. That’s according to the 2016 edition of The Thousand, an annual survey compiled by REAL Trends and advertised in The Wall Street Journal.
The survey ranks participating U.S. agents and teams in two separate categories: by number of homes sold in 2015 and 2015 sales volume.
Of the 1,002 rankings, RE/MAX agents claimed 152 spots. Keller Williams finished second with 132, while Coldwell Banker had 109. Sotheby’s was fourth with 62, and Century 21 fifth with 42. No other brand reached 40 agents on the ranking.
And among the 502 individual agents and agent teams closing the most residential transaction sides, nearly one-fourth (117) were with RE/MAX.
It goes to show: Great agents. Strong brand. Powerful results.
Congratulations to the outstanding Sales Associates and Teams!