Category: Real Estate

Real Estate

How Much Down Payment Do I Need?

Lora Knows...

Though 20% has traditionally been the ideal amount for a down payment, this simply isn’t the true standard.

In fact, according to the National Association of Realtors®, in 2022 first-time homebuyers put down an average of 6%, while repeat buyers typically put down an average of 17%.

Different loan programs come with varying down-payment requirements. The program that is best for you will be determined by how much you can afford. Whether you’re a repeat or a first-time homebuyer, the following guide can help you understand your options and discover the best one for your budget.

Conventional Loan
These are usually the most popular types of loans; each comes with varying requirements related to the amount of your down payment, income, and credit.

Conforming
As a general rule, the maximum amount you can borrow on a conforming loan is $726,200, though this limit can be higher in more expensive markets. Depending on your location, credit score, and home price, you can put down as little as 3%.

Nonconforming
If your home loan needs exceed the conforming loan limit, you must apply for a nonconforming one. This option necessitates a minimum of a 20% down payment, which may lead to a higher interest rate.

HomeReady
One of Fannie Mae’s more affordable loan programs, HomeReady is geared toward low-to-moderate-income buyers. It offers flexibility that other mortgages do not, as there are no income or location requirements, you can put down just 3%, and only one applicant needs to be a first-time homebuyer.

Government Backed Loans
These loans receive financial backing from the government and are designed to provide lenders with added security against payment defaults. This enables those lenders to offer lower interest rates to prospective borrowers, making it more affordable for lower-income households and individuals purchasing their first homes.

Federal Housing Authority (FHA) Loans
FHA loans are accessible in every state and accommodate various income levels. Eligible buyers can make down payments as low as 3.5%. Even individuals with limited or subpar credit history can potentially meet the criteria to obtain a loan.

United States Department of Agriculture (USDA) Loans
Supported by the US Department of Agriculture, this initiative primarily targets rural regions, assisting would-be buyers in acquiring a modest home. It provides several advantages, including 100 percent financing without a down payment (meaning there’s no down payment requirement) and lower interest rates. USDA loans are renowned for being the most cost-effective among all government-backed loan options.

The United States Department of Veteran Affairs (VA) Loans
Available in every state, these loans are available to active military personnel, armed forces, National Guard members, veterans, reservists, and qualifying surviving spouses. These loans offer 100 percent financing, reduced interest rates, and fewer associated fees.

How much is enough?
With such a wide range of programs, you have many options to choose from depending on your needs. However, as you embark on your homebuying journey, consider the advantages and disadvantages of having a lower down payment before you decide on the one that’s right for you.

Advantages

  1. You can buy a home sooner
  2. By paying less up front, you may be able to achieve your homeownership dreams quicker. With the escalating prices due to inventory shortages, you could save several thousand dollars.
  3. You can build home equity faster
  4. If you have been renting, it may be an ideal time to purchase a home so you can start building your own equity rather than your landlord’s.
  5. You won’t deplete your savings
  6. A lower down payment can mean reserving money for moving costs, repairs, and updates. You may also be better able to save for an emergency fund.

Disadvantages

  1. You’ll have a larger mortgage
  2. A smaller down payment means a higher principal amount, making it take longer to pay off. You’ll also have a greater monthly payment.
  3. Your interest rate will be higher
  5. Although you can save money up front, putting down the minimum will likely cost you more in the long run due to having a higher interest rate, which will further increase your monthly payments.
  6. You’ll pay private mortgage insurance – except if it is a VA Loan (this loan type does not have PMI)

Conventional loans require private mortgage insurance if your down payment is less than 20 percent. The precise amount hinges on your credit score and may fluctuate between 0.46% and 1.50% of the loan amount. These payments must continue until you’ve built up 20% equity in your home.

If you’re not able to put 20% down on a home, this doesn’t need to signify the end of your homeownership aspirations. Consult with a mortgage lender and your real estate agent to explore alternatives and identify the most suitable loan for your specific requirements.

Daily Happenings, Real Estate

10 Home Things to Know

Lora Knows...

You’ve just gotten the keys to your new home. You already know when you’ll have your first dinner party, what you’ll do for flowers in the garden, and where you’re going to hang that perfect picture.

However, you should also take some time to meet your new home home and find out how it all works. Your ability to learn about your home will keep you from getting caught off guard should a problem come up. The quicker you can solve an issue can be the difference between an oops moment and an insurance claim.

Water Shut Off Valve
In a plumbing emergency, you’ll want to know how to quickly find this valve and turn it off; burst pipes and major leaks will require a speedy response to prevent damage to your house. Check for it in the basement first or near your hot water tank if you don’t have a basement.

Gas Shut Off Valve
If your appliances are supplied by natural gas, it’s crucial that you know where your main gas supply is located. In a single-family house, you can usually find it on the side or back of the house, by the gas meter.

Electrical Panel
Take a bit of time and label your circuits according to the room they are attached to in your home. This will save you energy and frustration should an outlet in your home stop working, you can go to the panel and try to reset that breaker before calling an electrician.

Appliances
Look over your various appliances and their manuals to make sure they’re in good shape and you know how to use them, especially if you are inheriting appliances as they may need servicing sooner. For your refrigerator, ensure the condenser coils are clean and free of dust. Dishwashers often have a filter at the bottom that should be cleaned regularly. You should also empty your dryer lint trap after every load. You should also have the vent from the dryer to the outside of your home cleaned out annually, for safety.

Light Fixtures
Whether it is recessed lighting, an entry hall chandelier, oven light or your sconces – having extra bulbs on hand is always a great idea. Take a minute and look around and make a list of bulbs you need. Have a place in your home to store the bulbs and replace as needed.

Smoke Detectors
The National Fire Protection Association suggests placing a smoke alarm inside each bedroom, outside each sleeping area, and on each level of your home. Make sure to install them at least ten feet from a cooking appliance to reduce the possibility of a false alarm when you get a little overzealous with your cooking. If smoke alarms are already installed in your home, check their expiration dates and test them to confirm they are working properly. Do they have a battery? Make sure you have these on hand, nothing is more annoying that that beep every 20 seconds when the battery needs replaced.

Fireplace
When the temperature drops and the nights get chilly, there is nothing like a cozy fire to snuggle up in front of. But cozy can quickly turn to a smoke fest if proper precautions are not taken. If it’s been over a year since your fireplace’s last inspection, schedule one to check that everything is in working order. Also, learn how to open and close the flue to make sure the smoke goes up and out the chimney properly.

Buried Utilities
Whether it is water lines, electricity, cable or something else – it is important to know where you can dig and cannot dig. There is a service, in most states, that will come out and mark these utilities for you, at no charge, simply by calling 811.

Property Lines
Do not think that your local GIS will show you the accurate property lines. They have a disclaimer on their site stating it isn’t 100% accurate. The truly know where your property ends and your neighbors yard begins is by getting a survey. Having a survey done during your purchase also gives an additional layer to your title insurance.

Real Estate, Style

Renovating – Have a Plan

Lora Knows...

Home renovations can be complex and challenging. Proper preparation is crucial for a successful project. Here are three key steps you should take during the preparation process to increase the likelihood of a successful home renovation:

  1. Define Your Goals and Budget:
  • Start by clearly defining your renovation goals. What do you want to achieve with this project? Whether it’s adding space, modernizing a room, or improving energy efficiency, having a clear vision is essential.
  • Determine your budget. Establish a realistic budget that takes into account all costs, including materials, labor, permits, and contingencies for unexpected expenses. It’s essential to have a financial plan in place to avoid overspending.
  1. Plan and Design Carefully:
  • Work with a professional architect or designer to create detailed plans for your renovation. They can help you make the most of your space, choose materials, and create a timeline for the project.
  • Obtain any necessary permits. Depending on the scope of your renovation, you may need permits from your local government. Ensure you have all the required paperwork in order before you begin construction to avoid potential delays and fines.
  • Create a project timeline. Develop a realistic schedule that outlines the order of tasks, from demolition to finishing touches. This will help you and your contractors stay on track.
  1. Choose Reliable Contractors and Suppliers:
  • Research and hire experienced, licensed contractors. Get recommendations, check references, and request multiple quotes. A trustworthy contractor is essential for the success of your renovation.
  • Select high-quality materials and products. The materials you choose will impact the durability and aesthetics of your project. Invest in reliable, long-lasting products that align with your budget.
  • Communicate effectively with your contractors. Maintain open and clear communication throughout the project. Discuss any changes or concerns promptly to avoid misunderstandings and delays.

In addition to these three key steps, it’s important to be flexible and expect the unexpected during the renovation process. Delays, unforeseen issues, and design changes can occur. Having a contingency plan and some extra funds set aside for such situations is advisable.

Overall, a well-thought-out plan and careful preparation are key to a successful home renovation. When you take the time to define your goals, create detailed plans, and work with reliable professionals, you increase the chances of achieving the results you desire while staying within your budget and timeline.