How to Buy a Home Without a 20% Down Payment

One of the first things you’ll hear when you start considering homeownership is that you’ll need a hefty chunk of change upfront. Most financial planners recommend putting down a 20% down payment. On the current national median home price of $306,700, that comes to $61,340. And that’s serious money.

But if you don’t happen to have that kind of cash on hand, you’re not alone. Quicken Loans Vice President of Capital Markets Bill Banfield notes that the most common barrier to homeownership isn’t being able to afford the monthly mortgage payment—it’s being able to save the down payment.

Thankfully, there are other ways to go about buying a home that don’t require you to put 20% down, like the following:

Federal Housing Administration loans

The Federal Housing Administration requires a down payment of only 3.5%. Compared to 20%, that’s pretty sweet—but these government-backed mortgages aren’t for everyone. To be eligible, you’ll need a decent credit score, of at least 580. Scores as low as 500 may qualify, but then you’ll need to put 10% down.

Another stipulation is that you’ll have to pay mortgage insurance, an extra fee that’s required on home loans where less than 20% has been put down. There are also limits on how much money you can borrow, with a minimum and maximum between 65% and 115% of the median home price in an area—on average between $271,050 and $625,000. Still, in spite of these restrictions, these loans are plentiful and a boon to home buyers, particularly those who are entering the housing market for the first time.

VA loans

If you or your spouse has served in the military, Uncle Sam has your back! You may quality for a Veterans Affairs loan, which requires 0% down and, unlike FHA loans, no mortgage insurance, since the Department of Veterans Affairs insures the loan on your behalf.

To get a VA loan, you’ll need to present a certificate of eligibility, proving one of the following requirements:

• 90 consecutive days of active duty during wartime (including from Aug. 2, 1990, to the present; see other qualifying dates), or 181 days during peacetime.
• six years in the National Guard member or reserves.
• You were wounded in service, even if you served for less than the specified time.
• You’re a widow or widowers of a member of the military forces who died in action or from injuries suffered while on duty.

USDA rural development loans

The United States Department of Agriculture also offers 0% money-down loans to home buyers who qualify as having low or moderate income. And the threshold for “moderate” can be quite high depending on where you live; in San Francisco, it amounts to $141,000 for an individual.

And while eligible properties are typically in rural regions where space isn’t at a premium, this doesn’t necessarily relegate you to the sticks. A full 97% of the United States is covered under USDA loans; check whether any address or area is covered at USDA.gov.

State and local home buyer programs

The federal government isn’t the only one offering down payment assistance. In fact, there are 2,290 down payment programs across the country that offer financial assistance, kicking in an average of $17,766, according to one study.

Generally, these programs have income limitations and require you to take a home-buyer class. Find programs in your area on the National Council of State Housing Agencies website, or at the Down Payment Resource, which offers a calculator that can show you what you may be eligible for.

Credit unions

You may be able to get a mortgage with no down payment or a limited down payment from a credit union—a nonprofit banking cooperative whose members can typically borrow at lower rates.

In order to qualify, you will probably have to meet limited income requirements—such as a maximum of 80% of the median area income. You’ll also need a decent credit score. But the policies can vary widely, so check. For instance, the San Francisco Federal Credit Union recently offered 100% financing for up to $2 million to borrowers with an average credit score of 747 and $219,000 income.

How to find down payment help in your area

Start by talking with a lender, mortgage broker, or your Realtor to determine not only what home you can afford, but also what programs and financial assistance you might be eligible for. You can also see how much home you can afford by punching your numbers into realtor.com’s mortgage calculator.

Source: Realtor.com, Nichole Odijk DeMario
http://www.realtor.com/advice/finance/20-percent-down-payment-for-a-home/

Survey: Save for 3 Years for a Down Payment

Home owners who had to save up to buy a home spent an average of three years shoring up their finances before they had enough for a down payment, according to a new survey of more than 2,000 Americans commissioned by NerdWallet and conducted by Harris Poll. 

One in four home owners overall say they saved money individually on a monthly basis to afford their down payment, which includes 42 percent of millennial home owners, ages 18 to 34, and 29 percent of Gen X home owners, ages 35 to 54, according to the survey.

"Home buyers should work closely with their real estate agent to find properties that aren't at the top of their budget to keep affordability in check," says Chris Ling, head of home buying and mortgages for NerdWallet. "Also, working on a consistent savings plan for a down payment and closing costs, as well as addressing any outstanding credit issues, will increase homebuyers' chances of qualifying for better mortgage rates."

The survey also found that about seven in 10 Americans — or 71 percent — have fears about buying a home. The top fears cited are home repairs (36%), the financial commitment of home ownership (35%), not having enough money for other expenses (35%), and the long-term commitment it means to their partner (9%).

Source: NAR via NerdWallet
https://www.nerdwallet.com/blog/mortgages/nearly-half-couples-split-home-down-payment-survey/

Down Payment Assistance Programs Save Qualifying Homebuyers More Than $17,000 on Average Over Life of Loan

NEW ORLEANS – June 9, 2016 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released a joint report with Down Payment Resource analyzing the impact of down payment assistance on the cost of buying a home — including the down payment and monthly house payments for a median-priced home in 513 counties nationwide. The report was released at the National Association of Real Estate Editors 50th Annual Journalism Conference in New Orleans.

The report found that across all 513 counties analyzed, buyers using available down payment assistance programs can save an average of $17,766 representing 41 percent of a year’s wages compared to buyers who do not use down payment assistance.

The total savings breaks down to an average savings of $5,965 on the down payment for a median-priced home, and an average savings of $11,801 on monthly house payments over the life of the loan for a median-priced home.

The report combined public record sales deed data for single family homes and condos collected by RealtyTrac with average down payment assistance data collected from 2,477 down payment assistance programs across the country by Down Payment Resource along with the latest average weekly wage data available at the county level from the Bureau of Labor Statistics.

“Saving for a down payment can be difficult for prospective first-time homebuyers given the absence of substantial wage growth in recent years combined with the burden of student loan debt many are struggling under,” said Daren Blomquist, senior vice president at RealtyTrac. “Even just a 3 percent down payment requires 14 percent of annual wages on average across the 513 counties we analyzed, and in 67 counties a 3 percent down payment requires more than one-fifth of annual wages.”

“Homeownership programs not only help buyers overcome the initial cost of purchasing a home, but also produce a compounding positive impact on the homeowner’s saving and wealth-building capability,” said Rob Chrane, CEO at Down Payment Resource. “In fact, these programs are now the last frontier in the fight to preserve homeownership affordability. Rates are never going to be substantially lower, and home prices continue to trend higher.”

Markets with biggest down payment assistance savings

Markets where buyers using down payment assistance programs can realize the biggest total dollar savings compared to buyers not using down payment assistance were Kauai County, Hawaii ($80,148 total savings over the life of the loan); Placer County, California, in the Sacramento metro area ($78,539); San Francisco County, California ($77,411); Orange County, California in the Los Angeles metro area ($74,268); and Shasta County (Redding), California ($70,806).

Other markets with total savings of more than $50,000 over the life of the loan included counties in Miami, New Orleans, Seattle, Orlando, and New York.

“Any ability that buyers have to assist with current down payment requirements is positive — especially when we consider our region’s first time buyers who are sometimes facing an uphill battle as to whether to continue paying escalating rents, or save towards a down payment on a home,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “However, Seattle’s housing market remains incredibly competitive and many buyers are either paying cash or have substantial down payments. These buyers are seen as lower risk than those using down payment assistance and are therefore more likely to win in a multiple-offer situation.”

Markets where buyers using down payment assistance programs can realize the biggest savings as a percentage of average annual wages compared to buyers not using down payment assistance were Kauai County, Hawaii (191 percent of annual wages); Shasta County (Redding), California (176 percent); Sevier County (Sevierville), Tennessee (161 percent); El Dorado County, California in the Sacramento metro area (160 percent); and Allen County (Lima), Ohio (157 percent).

“While down payment assistance programs are beneficial for assisting buyers in achieving the American Dream of homeownership, current low available housing inventory is creating an inability to leverage such programs to the benefit of buyers,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “Couple current market conditions with certain sellers and agents restricting access to viewing of properties in consideration of marketing programs to create hyper-sensitivity regarding property availability, and we have what many are considering a potential environment of disparate impact relating to the inability of the Protected Class Buyers under the U.S. Fair Housing Act to leverage such down payment assistance programs in achieving their family goals of homeownership.”

Other markets with total savings of more than 130 percent of average annual wages included counties in Orlando, Los Angeles, Miami, Nashville and Memphis.

Average assistance covers 3 percent down in 82 percent of counties

Across all 513 counties, the average down payment assistance available through down payment assistance programs was $12,434, nearly twice the average 3 percent down payment of $6,424 on a median-priced home.

“These programs often make the difference between buying a home or not,” added Chrane of Down Payment Resource. “In most cases, the assistance results in a greater financial cushion by preventing homebuyers from liquidating their savings and retirement accounts to come up with a down payment.”

Average down payment assistance available was higher than a 3 percent down payment on a median-priced home in 422 of the 513 counties (82 percent), including Los Angeles County, California ($39,964 average down payment assistance compared to $15,450 for 3 percent down on a median-priced home); Cook County, Illinois in the Chicago metro area ($8,058 average assistance compared to $6,090 for 3 percent down); Harris County, Texas in the Houston metro area ($16,521 average assistance compared to $5,985 for 3 percent down); Maricopa County, Arizona in the Phoenix metro area ($19,067 average assistance compared to $6,750 for 3 percent down); and San Diego County, California ($25,262 average assistance compared to $14,460 for 3 percent down).

Markets where average assistance does not cover 3 percent down

Average down payment assistance was lower than a 3 percent down payment on a median-priced home in 91 of the 513 markets (18 percent).

Major markets where a 3 percent down payment on a median-priced home was higher than the average down payment assistance available included New York County (Manhattan), New York ($13,917 average down payment assistance compared to $34,500 for 3 percent down on a median-priced home); Fairfax County, Virginia in the Washington, D.C. metro area ($5,000 average assistance compared to $14,100 for 3 percent down); Salt Lake County, Utah ($5,313 average assistance compared to $8,078 for 3 percent down); Montgomery County, Maryland in the Washington, D.C. metro area ($4,680 average assistance compared to $11,550 for 3 percent down); and Baltimore County, Maryland ($6,173 average assistance compared to $6,210 for 3 percent down).

Other markets where a 3 percent down payment on a median-priced home was higher than the average down payment assistance available included counties in Philadelphia, San Francisco, Chicago, Kansas City, Des Moines, Portland, and St. Louis.

Source: RealtyTrac, Realtytrac Staff
http://www.realtytrac.com/news/home-prices-and-sales/2016-down-payment-assistance-affordability-analysis/

5 Ways You Didn’t Know You Could Save for a Down Payment

Buying your first home conjures up all kinds of warm and fuzzy emotions: pride, joy, contentment. But before you get to the good stuff, you’ve got to cobble together a down payment, a daunting sum if you follow the textbook advice to squirrel away 20% of a home’s cost.

Here are five creative ways to build your down payment nest egg faster than you may have ever imagined.

1.  Crowdsource Your Dream Home

You may have heard of people using sites like Kickstarter to fund creative projects like short films and concert tours. Well, who says you can’t crowdsource your first home? Forget the traditional registry, the fine china, and the 16-speed blender. Use sites like Feather the Nest and Hatch My House to raise your down payment. Hatch My House says it’s helped Americans raise more than $2 million for down payments.

2.  Ask the Seller to Help (Really!)

When sellers want to a get a deal done quickly, they might be willing to assist buyers with the closing costs. Fewer closing costs = more money you can apply toward your deposit.

“They’re called seller concessions,” says Ray Rodriguez, regional mortgage sales manager for the New York metro area at TD Bank. Talk with your real estate agent. She might help you negotiate for something like 2% of the overall sales price in concessions to help with the closing costs.

There are limits on concessions depending on the type of mortgage you get. For FHA mortgages, the cap is 6% of the sale price. For Fannie Mae-guaranteed loans, the caps vary between 3% and 9%, depending on the ratio between how much you put down and the amount you finance. Individual banks have varying caps on concessions.

No matter where they net out, concessions must be part of the purchase contract.

Related: New Law Protects You from Surprise Closing Costs

3.  Look into Government Options

The U.S. Department of Housing and Urban Development, or HUD, offers a number of homeownership programs, including assistance with down payment and closing costs. These are typically available for people who meet particular income or location requirements. HUD has a list of links by state that direct you to the appropriate page for information about your state.

HUD offers help based on profession as well. If you’re a law enforcement officer, firefighter, teacher, or EMT, you may be eligible under its Good Neighbor Next Door Sales Program for a 50% discount on a house’s HUD-appraised value in “revitalization areas.” Those areas are designated by Congress for  homeownership opportunities. And if you qualify for an FHA-insured mortgage under this program, the down payment is only $100; you can even finance the closing costs.

For veterans, the VA will guarantee part of a home loan through commercial lenders. Often, there’s no down payment or private mortgage insurance required, and the program helps borrowers secure a competitive interest rate.

Some cities also offer homeownership help. “The city of Hartford has the HouseHartford Program that gives down payment assistance and closing cost assistance,” says Matthew Carbray, a certified financial planner with Ridgeline Financial Partners and Carbray Staunton Financial Planners in Avon, Conn. The program partners with lenders, real estate attorneys, and homebuyer counseling agencies and has helped 1,200 low-income families.

4.  Check with Your Employer

Employer Assisted Housing (EAH) programs help connect low- to moderate-income workers with down payment assistance through their employer. In Pennsylvania, if you work for a participating EAH employer, you can apply for a loan of up to $8,000 for down payment and closing cost assistance. The loan is interest-free and borrowers have 10 years to pay it back. Washington University in St. Louis offers forgivable loans to qualified employees who want to purchase housing in specific city neighborhoods. University employees receive the lesser of 5% of the purchase price or $6,000 toward down payment or closing costs.

Ask the human resources or benefits personnel at your employer if the company is part of an EAH program.

5.  Take Advantage of Special Lender Programs

Finally, many lenders offer programs to help people buy a home with a small down payment. “I would say that the biggest misconception [of homebuying] is that you need 20% for the down payment of a house,” says Rodriguez. “There are a lot of programs out there that need a total of 3% or 3.5% down.”

FHA mortgages, for example, can require as little as 3.5%. But bear in mind that there are both upfront and monthly mortgage insurance payments. “The mortgage insurance could add another $300 to your monthly mortgage payment,” Rodriguez says.

Some lender programs go even further. TD Bank, for example, offers a 3% down payment with no mortgage insurance program, and other banks may have similar offerings. “Check with your regional bank,” Rodriguez says. “Maybe they have their own first-time buyer program.”

Not so daunting after all, is it? There’s actually a lot of help available to many first-time buyers who want to achieve their homeownership dreams. All you need to do is a little research — and start peeking at those home listings!


Source: HouseLogic, Erik Sherman
https://www.houselogic.com/buy/first-time-home-buyer/down-payment-assistance/

Where to Buy a Home If You Haven’t Saved for a Big Down Payment

If you’ve been saving to make a down payment on a home, you may not have to put money aside for as long as you’d thought, thanks to the average required down payment being much lower in some markets. And, according to recent research, the average required initial mortgage payment is only getting lower for hopeful homeowners.

For conventional 30-year fixed-rate mortgages in the first quarter of 2016, average down payment percentages ebbed slightly to 16.64%. This figure is down from 17.46% in the fourth quarter of 2015 and 16.98% in the first quarter of 2015. The average down payment was subsequently down over the same time period from $51,721 to an average $49,839, but was up from the year-ago figure of $44,007.

These figures, according to the latest LendingTree national down payment report, also indicate the average down payment for all purchase mortgages such as FHA, VA, non-prime and jumbo mortgages in 2Q/16 was $44,058, accounting for 12.18% of the home’s purchase price. And regarding just FHA mortgages, the average down payment was 8.74% ($16,998), a slight increase from the year ago figure. Meanwhile, the average 1Q/16 jumbo mortgage down payment was 23.89% ($194,950).

Complimenting its findings, LendingTree also released the markets where you can find this low-down-payment real estate. Below are the 10 cities with the lowest down payments as a percent of total mortgage.

Meanwhile, if you want to avoid having to put down a high down payment, don’t look to put down roots in New York, where the average down payment is 19.74%, or $78,979.51. This was followed by California (19.56%/$84,728.78), Hawaii (19.44%/$58,404), New Jersey (19.29%/$64,579) and Washington D.C. (18.50%/$98,440.09). You may notice the actual average down-payment sum doesn’t always correspond with the average down payment percentage, having to do with real estate prices. But, generally, places with higher home costs also demanded a higher down payment percentage.

Regardless of how much money you have saved, lenders will look at your credit report before granting a mortgage loan. Take a look at your credit reports and view two of your credit scores for free on Credit.com. Doing so will help you know if you need to address any errors on your report before applying for a mortgage. And doing what you can to improve your credit score before you apply will not only save you money in interest over the life of a loan, it could help you afford more house as well.

Source: Realtor.com, Credit.com
http://www.realtor.com/advice/buy/where-to-buy-a-home-if-you-havent-saved-for-a-big-down-payment/?iid=rdc_news_hp_carousel_theLatest

5 Home-Buying Mistakes That Can Sabotage Your Retirement

Buying a home is a major step toward building a solid, secure financial future—so whether you’ve made the plunge into ownership or are aiming to soon, you should pat yourself on the back! (This, of course, is not as easy as it seems.) And yet, in the race to settle into a place of your own, it can be easy to overextend yourself and cut corners on yet another important financial goal: saving for retirement.

Even if retirement is decades away for you, this subject nonetheless repeatedly tops the list of Americans’ economic fears in Gallup’s annual Financial Worry metric. But just because you buy a home doesn’t mean you can’t save for retirement, too. It’s a high-stakes balancing act, one where the right home-buying decisions will keep your retirement on track, and the wrong ones may throw you seriously off-kilter.

Here are some common retirement saboteurs to avoid.

Saboteur 1: Buying a house outside your price range

When you purchase a home, your retirement savings are on the line—even if it may not seem that way at the time.

“Housing is the biggest expense most people have,” points out Mary Erl, a certified financial planner and owner of Nest Builder Financial Advisors in Gurnee, IL. Hence, if you purchase a property that’s way outside your budget—and you’re forced to forfeit saving for retirement in order to make your mortgage payments—you’ve put yourself in a bind. A pickle, even.

And don’t just consider your current income, but your future income, too.

“People almost never take future earnings into consideration,” laments Joe Pitzl, a certified financial planner and partner at Pitzl Financial in Arden Hills, MN. “Younger couples get married, buy their first home based on their combined household income. But then when they start a family, one of the spouses leaves the workforce to raise the children and all of a sudden they’re bringing in a lot less money each month. That reduces how much money you can save for retirement.”

Saboteur 2: Draining retirement accounts for a down payment

While it’s tempting to borrow from your IRA or 401(k) to amass a down payment on a home, many financial experts say home buyers should do so sparingly, only as a last resort. IRAs and 401(k) plans are called retirement accounts for a reason—you’re not meant to touch the money until you’ve entered your golden years. If you borrow from either plan before age 59½, you’ll get slapped with a 10% excise tax on the amount you withdraw, on top of the regular income tax you pay on withdrawals from traditional defined contribution plans. Ouch.

Making early withdrawals also obviously prevents the money from accruing interest in these accounts. Put simply: Raiding the piggy bank before the money has matured can put a serious dent in your retirement savings, and many underestimate the repercussions.

“Withdrawing $5,000 from your IRA or 401(k) to pay for home repairs may not seem like a big deal,” Pitzl says. “But if you do so at age 30, that money would have grown exponentially over time if you left it in the account.”

Saboteur 3: Paying off your mortgage too quickly

While it sure sounds impressive to pay off your mortgage in three years, it’s not necessarily the best for your retirement. The reason: There’s good debt and bad debt. You want to pay off your credit card bill (bad debt) in full each cycle or you’re going to pay interest. Mortgage payments, though, work differently.

From a psychological standpoint, you probably don’t like owing a hefty sum to your lender. (We don’t blame you.) However, if you’re a younger homeowner with a new mortgage (good debt), it’s beneficial from a retirement savings perspective to make only the minimum monthly payments on the loan and invest the money where you can get a higher return.

For example, on a 30-year mortgage, at today’s interest rates, it makes more sense to put the money into an IRA or 401(k) than increase your mortgage payments, Pitzl says. “Don’t throw every penny you can at your mortgage debt,” he says. Granted, if you’re approaching retirement and are close to paying off your mortgage, it may make sense to up your payments if you want to retire debt-free.

Saboteur 4: Not saving for a rainy day

When asked about their emergency savings, an alarming 29% of Americans said they had none, according to a report last year by Bankrate.com. Nada. But without a sufficient emergency fund, you may be tempted to run up credit cards or tap your home’s equity or retirement accounts to pay for major repairs (new roofs don’t come cheap). And “if you get laid off, your mortgage payments don’t stop,” Erl says.

Therefore, make sure you have enough cash tucked away to cover six months of living expenses in the event you lose your job and budget 2% of your home’s value for annual maintenance (1% for newer homes), says Pitzl.

Saboteur 5: Waiting too long to downsize

Your $1 million McMansion may have made sense when your family of five was living under one roof, but if you’re heading into retirement, it’s probably time to downsize.

A common mistake, says Austin Chinn, a certified financial planner at Fountain Strategies in San Jose, CA: “People destroy their retirement savings by staying in their home so that they can have their kids move back in after they graduate college.”

Unless you’ve budgeted for a boomerang child, you need to do what makes sense for you financially.

“If you can move from a larger home to a smaller home and wipe out your mortgage, that’s a huge boost to your retirement,” says Erl.

Because crunching the numbers can be complicated, it can be helpful (and a huge relief) to meet with a financial planner to determine if a reverse mortgage makes sense for you (find one at Napfa.org).


Source: Realtor.com, Daniel Bortz
http://www.realtor.com/advice/finance/keep-home-from-undermining-retirement/?iid=rdc_news_hp_carousel_theLatest

Down Payment Insurance: Smart Protection or Total Waste of Money?

The housing crash of 2008 shattered the long-held notion that a home is a rock-solid, inviolable investment in your future. With home prices climbing steadily again to what seems like improbable (and possibly unsustainable) heights in some markets, many fear that we’re in another housing bubble—one that could burst, taking their life savings with it.

That’s why buyers may see the appeal in a new product from Dallas-based startup ValueInsured: +Plus, down payment insurance for homeowners. In a nutshell: It offers protection where protection didn’t previously exist.

However, the jury is still out on whether it’s a smart (additional) investment or the equivalent of feeding cash directly into the septic system.

It works like this: New homeowners can insure down payments of up to 20% for up to $200,000, paying a one-time premium when they close. Costs depend on how much they’re insuring and what state they’re in.

Then if home prices have fallen and these still relatively new homeowners have to move—say for a new job or to a bigger place after having triplets—ValueInsured will make sure they’re not out the difference.

Customers in all 50 states and Washington, DC, can get the insurance directly through the company or when they secure a mortgage through Amalgamated Bank. Buyers can also have their premiums included in their Amalgamated mortgages using a lender credit to pay the premium.

For example, a buyer who insures a 10% down payment of $25,000 on a $250,000 home in Ohio would pay a one-time fee of $1,455.52, according to ValueInsured’s website. If the buyer insured a 20% deposit of $50,000, it would cost $1,837.50. The costs of premiums vary by state.

“Nobody knows where life is going to take them,” says Joe Melendez, CEO of ValueInsured. “It’s about empowering a home buyer to purchase a home knowing that the money they’re putting into that home is insured in the event that they need to move and the value of their home is down.”

But if it sounds too good to be true… The insurance product, launched in the fall, comes with a few significant limitations. Homeowners have to wait two years before they can file a claim. And it’s good for up to only seven years after the day they closed. Seven years and one day? You’re out of luck.

The home must be a primary residence—the owners can’t be renting it out. And you won’t get your money back if you’re foreclosed upon (yikes) or if your home is seized under eminent domain (double yikes). Don’t even think about selling to a family member, either.

And again, this is down payment insurance—the policy doesn’t cover any upgrades you make, or costs related to the purchase or sale of the home.

The biggest catch: Home values are measured by a federal housing index for each state instead of how much the price for an individual residence declined. Those who buy the insurance will only receive a check for whatever is less: their down payment, their lost equity, or the drop in the index.




Here’s the problem: Take the example above, where you lose $20,000 (6.7%) on the home sale. If your state’s index doesn’t show a loss, then you won’t get a cent. Or in another scenario, say you lose that same $20,000 on the sale, but the state index is only down 3%. According to the state calculation, your home has lost only $9,000 in value, and that’s the amount that you’d get back.

“There’s just a lot of red flags here for me,” says Bob Hunter, director of insurance at the Consumer Federation of America, a Washington, DC–based, national coalition of about 350 pro-consumer groups. He is familiar with +Plus, although he has not specifically looked at a policy.

“I warn people not to buy new products, because they’re usually higher-priced,” says Hunter, a former Texas insurance commissioner. That’s because insurers don’t know on new products how much they’ll wind up reimbursing customers. And “they typically put in a lot of exclusions and other limitations to hold down their possible payouts.”

Hunter also worries that the five-year period in which homeowners can submit claims is too limited.

Protecting one’s down payment may indeed appeal to those living in turbulent real estate markets that got walloped when the housing bubble burst, says Michael Barry, a spokesman at the Insurance Information Institute, an industry-funded educational organization in New York.

Here’s the problem: Take the example above, where you lose $20,000 (6.7%) on the home sale. If your state’s index doesn’t show a loss, then you won’t get a cent. Or in another scenario, say you lose that same $20,000 on the sale, but the state index is only down 3%. According to the state calculation, your home has lost only $9,000 in value, and that’s the amount that you’d get back.

“There’s just a lot of red flags here for me,” says Bob Hunter, director of insurance at the Consumer Federation of America, a Washington, DC–based, national coalition of about 350 pro-consumer groups. He is familiar with +Plus, although he has not specifically looked at a policy.

“I warn people not to buy new products, because they’re usually higher-priced,” says Hunter, a former Texas insurance commissioner. That’s because insurers don’t know on new products how much they’ll wind up reimbursing customers. And “they typically put in a lot of exclusions and other limitations to hold down their possible payouts.”

Hunter also worries that the five-year period in which homeowners can submit claims is too limited.

Protecting one’s down payment may indeed appeal to those living in turbulent real estate markets that got walloped when the housing bubble burst, says Michael Barry, a spokesman at the Insurance Information Institute, an industry-funded educational organization in New York.

“[But] I’d be reluctant to cut another check at closing,” he says. “This is just one more additional expense.”

Despite the caveats, the concept of down payment insurance is alluring to real estate agents such as Deb Counts-Tabor.

Bidding wars have become common in the white-hot Portland, OR, market where she works, and desperate buyers, rattled by the limited number of homes for sale, will often pay well over the list price.

“People are going $10,000, $20,000, $30,000 over the asking price and waiving their appraisals because they want the house,” says Counts-Tabor, of Oregon Realty. But “if the market adjusts before they can pay that down, they end up underwater.”

It might make sense for buyers who worry they may have overpaid, she says.

Denver real estate agent Kristal Kraft would agree. Two of the properties she recently represented sold for nearly $30,000 more than their list prices as Denver’s market becomes increasingly competitive.

“It would give buyers peace of mind,” says Kraft, of the Berkshire Group. “They can be assured they can get some of their money back.”

Source: Realtor.com, Clare Trapasso
http://www.realtor.com/news/trends/down-payment-insurance/?iid=rdc_news_hp_carousel_theLatest

Resolve to Give Up These 8 Money-Wasters for a Down Payment Before 2017

The all important down payment. Most home purchase won't happen without it. For those of you having trouble saving up for a down payment, below is some advice you might find helpful.


The presents are unwrapped, the holiday decorations are packed up (or not, we won’t tell), and the ball has dropped on the end of 2015. It’s time to make some New Year’s resolutions—homeowner-style.

You can make 2016 the year of the down payment. Really.

By cutting a few things from your budget this year, you can speed up your progress toward having a down payment by the time those holiday decorations come back out of the closet. You probably knew these were splurges eating up your discretionary income, but did you know just how much? Don’t worry—we’ll do the painful math for you so you know what to kick to the curb in 2016.


1. Skip the latte

Annual savings: $876 (plus taxes!)

A medium latte at Starbucks costs $3.65. If you stop by every day before work, that adds up So, suffer through the free coffee at work and think instead of the new kitchen where you can create your own coffee bar.


2. Cut the gym membership

Annual savings: $696

The average monthly cost of a gym membership is $58 a month, or $696 a year, and that’s assuming you’re already a member and not paying sign-up fees as well. Not to mention that most of our good intentions taper off sometime in February and we end up paying for something we’re not even using.

We’re not telling you to stop exercising. But try getting creative with your routine instead. Enjoy the great outdoors! Walk on your lunch break! Ride your bike! You’ll bag a surprising amount of cash toward your down payment.amy schumer gym


3. Cancel the cable

Annual savings: $1,189

Cable gets more expensive every year. In 2015, cable customers paid an average of $99.10 a month, or $1,189.20 for the year, according to the Leichtman Research Group. If you drop the cable in favor of, say, Netflix at $7.99 per month, you’ll save $91.11 per month—or $1,093.32 for the year—and get commercial-free original shows. liz-lemon-12


4. While you’re at it, drop a streaming service

Annual savings: Nearly $100

You don’t really need to subscribe to all the streaming channels at once. If you have Netfix, Hulu and Amazon Prime, you’re paying roughly $25 a month. If you drop Amazon Prime, you could save $99 a year. If you drop Hulu or Netflix, you could save $95.88 a year. Tip: Hulu allows you to put your subscription on hold. So if you find yourself having less time for binge-watching, try suspending your Hulu account until you have more time for it and save yourself that dough.


5. Lower your mega smartphone plan

Annual savings: Up to $300 per year

Did you get one of those unlimited everything plans when you bought your phone and never changed it—even after you realized you don’t talk on the phone that much and Candy Crush Saga doesn’t use much data? If you switch to a lower plan—or at least drop a couple gigs of data—you could save $10 to $25 a month.


6. Pack a lunch instead of buying it

Annual savings: $1,714

Taking a sack lunch to work might make you feel like you’re back in elementary school, but let’s do the math on how much it saves on your lunch costs. The average daily cost for the American worker who bought lunch from a restaurant in 2015 was $11.14, according to Statista. That amount adds up to about $56 a week, or $2,674 a year. If you can make a sack lunch for $4 a day, you will spend about $20 a week, $80 a month, or $960 a year — an annual savings of about $1,714.


7. Quit drinking

Annual savings: $3,168

If you’re an avid social drinker, you may not realize how much those $10 cocktails are adding up.

Say you go out three times a week, ordering at least two cocktails at $10 each plus the standard $1 tip per drink. That adds up to $66 a week, $264 a month, and—wait for it—a whopping $3,168 a year.


8. Go to the cleaners much less

Annual savings: $1,354

Are you still taking most of your clothes to the cleaners? Costs of dry cleaning or laundering items can vary a lot. A survey by Consumers’ Checkbook determined the average price of laundering a men’s dress shirt was $1.87, laundering men’s khaki slacks was $5.57, and dry-cleaning a two-piece suit was $11.13. If you take in two pairs of slacks ($11.14), five shirts ($9.35) and a suit every week, you’ll pay about $31.63 a week before taxes, which can add up to about $1,645 a year. Based on those numbers, if you wash your own slacks and shirts and reduce by half the number of times you have your suit dry cleaned, you could save up to $1,354 a year.

Best of all, you won’t miss the things you cut (OK, maybe some), but you’ll rack up a truckload of money in 12 short months. In fact, drop everything from this list and you could bank nearly $9,400 by the end of the year. Take that, down payment!

Source: Realtor.com, Angela Colley
http://www.realtor.com/advice/finance/resolve-to-give-up-these-8-money-wasters-for-a-down-payment-before-2017/?iid=rdc_news_hp_carousel_theLatest

Slaying Myths About Buying A Home

The Down Payment Quandary: Trying to Save 20 Percent

The crimp that high rents are putting in people’s budgets has a direct impact on how able they are to save for a down payment.



Rising home prices compound the problem, requiring an even larger heap of cash to reach the 20 percent mark, the amount typically required to avoid mortgage insurance.

People used to get there with second jobs, but lenders don’t see this as much since the recession.

“Instead, what you see is somebody graduates from college, they move back home to pay off debt and save money, and they work 50, 60 hours a week at the job that they found,” said Staci Titsworth, a regional manager for PNC Mortgage in Pittsburgh.

There are also more double-income households, and more first-time buyers waiting to buy homes where they can stay more than 5 years and possibly raise families, she said.

People are also coming in below 20 percent, which typically requires paying mortgage insurance.

Even with mortgage insurance tacked on, people tend to have lower monthly payments for mortgages than for rent. Indeed, homeowners in general can expect to spend about 15 percent of their monthly income on mortgage payments (without mortgage insurance) for a median-valued home, while renters can expect to spend 30 percent on rent.

Borrowers in pricey markets have taken the lower down payment route for years.

That’s how Sara Clarke, an editor at U.S. News & World Report, and her husband landed their first home: a townhouse in Alexandria, VA, that cost $299,500. They put down 5 percent, money saved from a childhood paper route and fast-food jobs, plus a little help from a relative.

By the time they sold it about 10 years later, they had accrued the 20 percent down payment they needed for a single-family home in Fairfax County. They even had money left over to replenish a savings account depleted by upgrades on their first kitchen, bathrooms, roof and “redoing everything we could redo.”

Assistance from parents remains a common way to get a foot in the door of your own home. Loans and gifts from family and friends rose from 8 percent to 21 percent during the recession, and was down to 13 percent last year.

JPMorgan Chase has also seen first-time buyers becoming more disciplined about spending and tapping into 401(k)s, said Sean Grzebin, the bank’s head of retail mortgage lending.

Source: Zillow Blog, Melissa Allison
http://www.zillow.com/blog/trying-to-save-20-percent-186587/

Selling Stocks to Buy a Home? How to Do It Right

I thought I'd take a moment to post this article since quite a few buyers here in the silicon valley, who work in the tech sector have had to cash in some of their stock options to buy that dream house. Quite a few of my past buyers have had to do this.


To cover the down payment required for a jumbo loan, some home buyers are borrowing money—from themselves.


When buying a home in Avon, Conn., Matthew and Shannon Carbray decided to sell some of their stock holdings to make a down payment on a $1.02 million, five-bedroom property. But initially, they couldn’t agree on the amount to put down.

Knowing that this is the home where the couple plans to stay and raise a family, Mr. Carbray, a 35-year-old managing partner at Avon-based Ridgeline Financial Partners, wanted to put down 20%, the minimum required down payment for most jumbo mortgages. He calculated that cash left in the stock market would make greater gains than the low cost of interest locked in for 30 years, and that interest also is tax-deductible, he says.

Ms. Carbray, a 32-year-old fixed-income portfolio manager at Hartford Investment Management Co., wanted to cash out more stock and put down 30% because she just felt more comfortable with lower monthly mortgage payments, Mr. Carbray says.

“I was looking at it mathematically and my wife was looking at it emotionally,” he adds.

In the end, they compromised and put 25% down to buy their home in March.

In 2014, about one-fifth of borrowers sold stocks or bonds or borrowed against their retirement accounts to finance a home purchase, according to the National Association of Realtors. (News Corp, which owns The Wall Street Journal, also owns Realtor.com, the listing website of the National Association of Realtors.)

There are no hard and fast rules regarding if and when to cash in stocks to make a home purchase. Lenders and financial planners, however, advise borrowers not to panic, just plan ahead, especially in periods of market volatility. They will caution against borrowing from a retirement plan, because homeowners risk hefty penalties and an income-tax bill if they fail to follow loan-repayment terms.

An alternative to selling stocks is getting a loan secured against assets, says Stephen Stabile, a financial adviser with Merrill Lynch Wealth Management. For example, Bank of America Merrill Lynch has a “loan-management account” that offers clients a line of credit based on their Merrill Lynch taxable brokerage portfolio holdings.

The funds can go toward numerous uses, including a mortgage down payment. Customers with substantial holdings currently may get interest rates that are lower than on 30-year, fixed-rate jumbo mortgages, but could be higher than on other types of mortgages, Mr. Stabile says. One recent borrower, a client who was buying a nearly $5 million New York condo, opted to borrow against her stock holdings instead of selling stocks in a down market.

Borrowers should keep in mind, however, that most banks require a greater collateral amount, usually 125%, for a securities-backed loan than for straight dollars in a bank account, to allow for market fluctuations, says Mike McPartland, head of investment finance for Citibank Private Bank North America. “So if it’s a $250,000 down payment, the bank would require that $312,500 remain in that investment account the entire time,” he adds.

However, should the stock market fall precipitously, borrowers could be subject to a margin call and forced to pay the difference between the required collateral amount and its current market value, Mr. McPartland says.

Here are a few more factors to consider:

• Don’t wait too long. Home buyers who wait until the last minute to cash in stocks—hoping that values will rise—risk delaying the home closing, since the sale and money transfer can take several business days, says Peter Grabel, managing director of Stamford, Conn.-based Luxury Mortgage Corp. Also, a stock-market drop amid a home purchase could affect a borrower’s ability to qualify for a loan, he adds.

• Liquidate early. Cash in a bank account is worth more than stocks or mutual funds when it comes to qualifying for a mortgage, because lenders typically value a portfolio at only 70% of its current monetary value, Mr. Grabel says.

• Long-term gains. Borrowers whose stock has appreciated significantly will likely face capital-gains taxes when they sell their holdings, adding to the cost of the home, Mr. Stabile says.

Source: Realtor.com, Anya Martin
http://www.realtor.com/advice/finance/selling-stocks-to-buy-a-home-how-to-do-it-right/