Nicole Christianson, a 26-year-old sales rep, was tired of writing big checks for tiny apartments. And she wanted to do more with her cash than stash it in a savings account.
One night, she and her husband Thure, 28, took a look at their newly combined finances and uncovered a pleasant surprise: Together, they had saved enough for a 5% down payment on the affordable fixer-upper right across the street from their Milwaukee apartment. They closed in December 2017, and Nicole says they’re happy to finally be “making something that’s ours.”
Millennials’ homeownership goals
Many in Christianson’s age group are chasing that feeling. Eighty-two percent of young adults say owning a home is a priority, according to NerdWallet’s 2018 Home Buyer Report. If they can make it happen, most will be first-time home buyers, but that ‘if’ looms large.
Millennials (those born from 1981 to 1997) are buying houses at lower rates than when previous generations were the same age, and it’s not hard to see why. Saving up for a down payment and qualifying for a mortgage can feel like pipe dreams for young adults grappling with student debt, underemployment and high rent costs.
Still, millennials are an optimistic lot, and research shows there are big rewards in store for those who find a way to buy their first home sooner rather than later.
Of today’s older adults, those who bought their first home from ages 25 to 34 accumulated the most housing wealth by their 60s — a median of around $150,000, according to a report by the Urban Institute, a nonprofit research organization.
In contrast, the median housing wealth for those in their early 60s who bought later (ages 35 to 44), was about half as much, at $76,000. Homeowners who bought after they were 45 had about $44,000 in housing wealth by their 60s.
“Housing wealth” is another term for equity, which is the difference between the home’s market value and an owner’s mortgage balance. Equity becomes profit when a home is sold or refinanced, and it’s more likely to grow the longer one owns the home.
The takeaway for millennials? Buy a home as early as you can feasibly do so, says Laurie Goodman, vice president of housing finance policy at the Urban Institute.
Paying rent to yourself is a top perk of homeownership, Goodman says. “It’s also forced savings in the sense that you’re paying down a mortgage each month. Yes, you could put away the same amount of money in a savings plan, but people don’t.”
Thinking about homeownership as part of retirement planning is important for millennials, says Jung Hyun Choi, a research associate at the Urban Institute.
“People are living longer and job stability has declined,” she says. These circumstances make housing wealth even more essential.
Certain mortgage options can reduce the upfront costs of buying a home, allowing younger borrowers to qualify with far less than the traditional 20% down payment.
“We wanted to go with a VA lender,” says Marissa Avila, 33, a self-employed small-business consultant in Norfolk, Virginia. Her husband Greg, 36, is in the Navy, so they were eligible for a loan guaranteed by the Department of Veterans Affairs. The VA loan helped the Avilas buy their colonial-style house with no down payment.
Low down payment loans aren’t just for borrowers in uniform: Some conventional loans require just 3% down, the minimum for a Federal Housing Administration mortgage is 3.5% and eligible borrowers can get a Department of Agriculture, or USDA, loan with nothing down.
Goodman recommends first-time home buyers investigate down payment assistance programs. State housing agencies often offer mortgage, down payment and closing-cost assistance. These programs may allow millennials to buy a home sooner than if they try to build savings, she says.
Talking to a lender can be a good first step if you’re not sure that you’re ready, Avila says.
“The worst that someone is going to say is ‘No, you need to save a little bit more money,’ and then you know where you stand,” she says. “It’s so much easier once you finally start that conversation.”
If you’re fortunate enough to get a refund this tax season, you might have big plans for your money. Some people plan vacations, shopping sprees, or use this money to beef up their savings account. But these aren’t the only uses for a refund.
Getting a tax refund is also a good excuse to move forward with a home purchase. Some home loan experts predict mortgage rates could increase to 5% by the end of 2019. So if you want a low rate, you may want to act quickly.
Here’s why tax season is a perfect time to buy a house.
1. A tax refund adds to your down payment fund
Unless you qualify for a VA or USDA home loan, you’ll likely need a down payment for a home purchase. Down payments typically range from 3% to 10%, but there’s always the option to put down 20% or more.
If you lack sufficient funding for a down payment, getting a sizable tax refund might help you hit your down payment goals. And if you have enough in your down payment fund, use your tax refund to pay closing costs such as attorney fees, title search fees, etc. A tax refund can also cover the cost of discount points which help buy down your mortgage rate.
2. Pay off credit cards and other debt
The higher your credit score, the easier it’ll be to get approved for a mortgage loan and get a low mortgage rate.
Different factors play a role in your credit score, such as your payment history and how much you owe. If you already have a good payment history, you can possibly add points to your credit score by reducing the amount you owe on your credit cards.
Too much credit card debt raises your credit utilization ratio and hurts your credit score. As a general rule of thumb, your total outstanding credit card balances should not exceed 30% of your credit limit.
If you’re carrying too much debt, use your tax refund to wipe out or pay down these balances. This helps improve your credit score, plus paying off debt frees up cash that you can allocate toward your mortgage payment.
3. Put it towards your current home
A tax refund also comes in handy when selling a home before buying a new one. Unexpected expenses can pop up when preparing to sell a home. If the homebuyer requests a home inspection, the inspector may uncover several items that need repairing. A tax refund can help soften this financial blow and keep the home sale on track.
Or, use funds from a tax refund to make your property more attractive to buyers. With the extra cash, you might be able to afford incentives or concessions like contributing to a buyer’s closing costs.
Then again, maybe you don’t want to move. If current mortgage rates are lower than the rate you’re paying, put your tax refund toward refinancing your mortgage loan. Refinancing creates a new mortgage and can result in better home loan terms. Refinancing does have associated costs and involves getting approved for a new mortgage (meaning you’ll pay closing costs again).
Refinancing isn’t only useful for getting a lower mortgage rate, though. It’s also a good idea for converting an FHA home loan to a conventional home loan with the purpose of removing mortgage insurance (once you have 20% equity). Some homeowners also refinance to switch from an adjustable-rate mortgage to a fixed-rate mortgage.
Finally, there’s the option of putting a tax refund toward home improvements. Home updates that offer the biggest bang for your buck include kitchen and bathroom remodeling projects, room additions, new windows, and updated landscaping.
Before spending your tax refund on another gadget or electronics, consider how to invest this money in your future. Buying a property and refinancing an existing mortgage can be costly, but your tax refund might provide the cash you need. Give the loan experts at Cherry Creek Mortgage a call today to learn about our various home loan solutions.
In January, the number of new residential listings (single-family and condos) leaped 109.7 percent from December to 4,821, an increase of 13.6 percent year over year. Active listings were up just 5.45 percent from the month prior, and up 52 percent compared to 2018’s record-low January reaching 5,881. Notably, the number of active listings is still significantly below the historic average in the month of January of 13,469 (1985-2018).
“Choices, choices, choices! Buyers should be doing a happy dance because they finally have some choices,” said Jill Schafer, Chair of the DMAR Market Trends Committee and Metro Denver REALTOR®. “Even though the Denver metro area is still a seller’s market in most price ranges, there’s no doubt this is the best time to buy in a long time!”
According to Schafer, it’s often said that the Denver real estate market doesn’t shift into full gear until after the Super Bowl, but with more choices, interest rates lower than expected and warmer weather than usual, homebuyers were putting in more contracts in January, up 33.97 percent from December and 7.24 percent year over year. As such, higher home sales are expected next month.
While buyers are taking advantage of their housing choices, home sellers are still seeing appreciation with the average sold price of a home up 2.89 percent year over year, an increase from $448,132 in January 2018 to $461,101 in January 2019. “Apparently, both homebuyers and sellers can dance as having choices seems to be a good thing for all,” adds Schafer.
DMAR’s monthly report also includes statistics and analyses in its supplemental “Luxury Market Report” (properties sold for $1 million or greater), “Signature Market Report” (properties sold between $750,000 and $999,999), “Premier Market Report” (properties sold between $500,000 and $749,999), and “Classic Market” (properties sold between $400,000 and $499,999). In January 2019, 93 homes sold and closed for $1 million or greater – down 31.11 percent from December and 14.68 percent year over year. The closed dollar volume in the luxury segment was $150,646,236, down 24.26 percent from December and 9.37 percent year over year.
“There are 7.65 months of inventory in the $1 million plus price point, so the pendulum has fully swung and the Luxury Market has officially changed to a buyer’s market,” said Andrew Abrams, DMAR Market Trends Committee member and metro Denver REALTOR®. “However, that hasn’t necessarily changed how quickly luxury buyers need to pull the trigger.”
According to Abrams, the most astonishing stat of the month is the median days on market. From 2016 to 2018, the median days on market has ranged from 71 to 84. In January, the median days on market for a home was at 41, which is less than half the days from the previous year.
The highest priced single-family home that sold in January was $5.1 million representing four bedrooms, six bathrooms and 10,188 above ground square feet in Boulder. The highest priced condo sale was $10,750,000 million representing three bedrooms, five bathrooms and 6,295 above ground square feet in Denver.
The developer that owns Denver landmark Loretto Heights has announced the first step in the transformation of the 72-acre campus on South Federal Boulevard: converting a former dorm and classroom building into affordable housing.
Westside Investment Partners in a news release Thursday highlighted the plans to convert 90-year-old Pancratia Hall into the Pancratia Hall Lofts, which figures to serve as income-restricted housing for working-class residents.
Just what income levels the future lofts will be reserved for was not covered in the release. Westside did name the team that will lead the project — Boulder-based Hartman Ely Investments and Proximity Green of Denver. The two firms have 40 years experience in renovating and adapting historic buildings for new uses, according to the developer. They will “utilize several forms of tax credit financing” to convert the 1929 structure into “a stately affordable housing community,” Thursday news release said.
Glendale-based Westside purchased the Loretto Heights campus — known for the steeple that sits atop its administration building at 3001 S. Federal that can be seen for miles in the south metro area — for $15.75 million last summer. Westside has vowed to preserve the administration building and an on-site cemetery that is home to the remains of 62 Sisters of Loretto nuns. The campus was originally a boarding school for Catholic girls and most recently served as a technical college.
Pancratia Hall was named for Mother Pancratia Bonfils and designed by Denver architect Harry W. J. Edbrooke, according to Westside.
“We believe this is a befitting reuse of a magnificent building that will continue to honor both Harry W. J. Edbrooke and Mother Pancratia Bonfils,” Mark Witkiewicz, a partner at Westside, said in the release.
William Brummett Architects and Palace Construction, both of Denver, will also be part of the team, according to Westside. The team will pursue tax credit financing at the same time it is moving forward with design and permitting for the project. The aim is to break ground in 2020. (You can find the entire article at the Denver Post)
Home Partners of America’s mission is to make homeownership a reality for more people by providing residents a transparent Lease Purchase Program which offers them more choice, flexibility and control. The process is simple and transparent. 1. You apply for approval with Home Partners of America. You are qualifying for the amount of rent you can afford. Each home for sale has a rental amount set that you would qualify for. You don’t qualify for the purchase price….you qualify for the rental amount. 2. Once approved, I will help you find a find a Home Partners qualified home. These are single family and townhouse homes for sale priced from $100k to $450k. It does include most houses for sale but there are some limitations. 3. Home Partners buys the home you select… and you agree to lease for a minimum of 1 year. You can move out of the home after the one year lease term without penalty. You can lease the home up to 5 years. Most importantly, you can purchase the home at any time during the tenancy! Each year, the home purchase price increases 5.0%. Now…you have options and have a selection of most of the homes that are available on the real estate market for sale! Here is a link to the website for a quick video presentation about how the program works. https://www.homepartners.com/how-it-works Please… don’t sign up for anything yet! If you are interested, let me help you. We can meet to discuss this program and make sure it is right for you!
Buying your first home comes with many big decisions and can be as scary as it is exciting. It’s easy to get swept up in the whirlwind of home shopping and make mistakes that could leave you with buyer’s remorse later.
If this is your first rodeo as a homebuyer or it’s been many years since you last bought a home, knowledge is power. Here are the 14 most common mistakes first-time buyers make — and how to steer clear of these missteps.
1. Looking for a home before applying for a mortgage
Many first-time buyers make the mistake of viewing homes before ever meeting with a mortgage lender. This puts you behind the ball if a home hits the market you love, or you look at homes that you can’t afford.
In many large markets, housing inventory is tight and competition is fierce. You might find yourself willing to stretch your budget to buy a property or lose a property because you aren’t preapproved for a mortgage, says Alfredo Arteaga, a loan officer with Movement Mortgage in Mission Viejo, California.
What to do instead: “Before you fall in love with that gorgeous dream house you’ve been eyeing, be sure to get a fully underwritten preapproval,” Arteaga says. Being preapproved sends the message that you’re a serious buyer whose credit and finances pass muster to successfully get a loan.
2. Talking to only one lender
This one is a biggie. First-time buyers might get a mortgage from the first (and only) lender or bank they talk to, potentially leaving thousands of dollars on the table. The more you shop around, the better basis for comparison you’ll have to ensure you’re getting a good deal.
“A good mortgage loan officer can look at your situation and diagnose any potential roadblocks ahead to give you a clear understanding of your home-buying options,” Arteaga says.
What to do instead: Shop around with at least three different lenders, as well as a mortgage broker. Compare rates, lender fees and loan terms. Don’t discount customer service and lender responsiveness; both play key roles in making the mortgage approval process run smoothly.
3. Buying more house than you can afford
It’s easy to fall in love with homes that might stretch your budget, but overextending yourself can lead to regret and worse later. It can put you at higher risk of losing your home if you fall on tough financial times.
What to do instead: Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for. Just because you can qualify for a $300,000 loan, that doesn’t mean you can afford the monthly payments that come with it. Factor in your other obligations that don’t show on a credit report when determining how much house you can afford.
4. Moving too fast
Buying a home can be complex, particularly when you get into the weeds of the mortgage process. Rushing the process can cost you later on, says Nick Bush, a Realtor with TowerHill Realty in Rockville, Maryland.
“The biggest mistake that I see [first-time buyers make] is to not plan far enough ahead for their purchase,” Bush says. “This doesn’t allow them to save [for a down payment and closing costs], fix items on their credit report, and debunk some of the myths about the process with a Realtor and lender.”
What to do instead: Map out your home-buying timeline at least a year in advance. Keep in mind it can take months — even years — to repair poor credit and save enough for a sizable down payment. Work on boosting your credit score, paying down debt and saving more money to put you in a stronger position to get preapproved.
5. Draining your savings
Spending all or most of their savings on the down payment and closing costs is one of the biggest mistakes first-time homebuyers make, says Ed Conarchy, a mortgage planner and investment adviser at Cherry Creek Mortgage in Gurnee, Illinois.
“Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance, but they are picking the wrong poison because they are left with no savings at all,” Conarchy says.
Homebuyers who put 20 percent or more down don’t have to pay for mortgage insurance when getting a conventional mortgage. That’s usually translated into substantial savings on the monthly mortgage payment. But it’s not worth the risk of living on the edge, Conarchy says.
What to do instead: Aim to have three to six months of living expenses in an emergency fund. Paying mortgage insurance isn’t ideal, but depleting your emergency or retirement savings to make a large down payment is riskier.
6. Being careless with credit
Lenders pull credit reports at preapproval to make sure things check out and again just before closing. They want to make sure nothing has changed in your financial picture. Any new loans or credit card accounts on your credit report can jeopardize the closing. Buyers, especially first-timers, often learn this lesson the hard way.
The goal: keep the status quo in your finances from preapproval to closing. Otherwise, you could lower your credit score, run up your debt-to-income ratio and imperil your final loan approval.
What to do instead: Don’t open new credit cards, close existing accounts, take out new loans or make large purchases on existing credit accounts in the months leading up to applying for a mortgage through closing day. Pay down your existing balances to below 30 percent of your available credit limit, and pay your bills on time and in full every month.
7. Fixating on house over neighborhood
Sure, you want a home that checks off the items on your wish list and meets your needs. Being nitpicky about a home’s cosmetics, however, can be short-sighted if you wind up in a neighborhood you hate, says Alison Bernstein, president and founder of Suburban Jungle, a real estate strategy firm.
“Selecting the right town is critical to your life and family development,” Bernstein says. “The goal is to find you and your brood a place where the culture and values of the [area] match yours. You can always trade up or down for a new home; add a third bathroom or renovate a basement.”
What to do instead: Ask your real estate agent to help you track down neighborhood crime stats and school ratings. Measure the drive from the neighborhood to your job to gauge commuting time and proximity to public transportation. Visit the neighborhood at different times to get a sense of traffic, neighbor interactions and the overall vibe to see if it’s an area that appeals to you.
8. Making decisions based on emotion
Buying a house is a major life milestone. It’s a place where you’ll make memories, create a space that’s truly yours, and put down roots. It’s easy to get too attached and make emotional decisions, remember that you’re also making one of the largest investments of your life, says Ralph DiBugnara, president of Home Qualified in New York City.
“With this being a strong seller’s market, a lot of first-time buyers are bidding over what they are comfortable with because it is taking them longer than usual to find homes,” DiBugnara says.
What to do instead: “Have a budget and stick to it,” DiBugnara says. “Don’t become emotionally attached to a home that is not yours.”
9. Assuming you need a 20 percent down payment
The long-held belief that you must put 20 percent down payment is a myth. While a 20 percent down payment does help you avoid paying private mortgage insurance, many buyers today don’t want (or can’t) put down that much money. In fact, the median down payment on a home is 13 percent, according to the National Association of Realtors.
Delaying your home purchase to save up 20 percent could take years, and you could limit cash flow that could be put to better use maximizing your retirement savings, adding to your emergency fund, or paying down high-interest debt.
What to consider instead: You can put as little as 3 percent down for a conventional mortgage (note: you’ll pay mortgage insurance). Some government-insured loans require 3.5 percent down or zero down, in some cases. Plus, check with your local or state housing programs to see if you qualify for housing assistance programs designed for first-time buyers.
10. Waiting for the ‘unicorn’
Unicorns do not exist in real estate, and finding a perfect property is like finding a needle in a haystack. Looking for perfection can narrow your choices too much, and you might pass over solid contenders in the hopes that something better will come along. But this type of thinking can sabotage your search, says James D’Astice, a real estate agent with Compass in Chicago.
What to do instead: Keep an open mind about what’s on the market and be willing to put in some sweat equity, DiBugnara says. Some loan programs let you roll the cost of repairs into your mortgage, too, he adds.
11. Overlooking FHA, VA and USDA loans
First-time buyers might be cash-strapped in this environment of rising home prices and higher mortgage rates. As a result, it can be harder for them to qualify for a conventional loan and they might assume they have no financing options. That’s where government-insured loans enter the picture.
What to do instead: Look into one of the three government-insured loan programs backed by the Federal Housing Administration (FHA loans), U.S. Department of Veterans Affairs (VA loans) and U.S Department of Agriculture (USDA loans). Here’s a brief overview of each:
FHA loans require just 3.5 percent down with a minimum 580 credit score. FHA loans can fill the gap for borrowers who don’t have top-notch credit or little money saved up. The major drawback to these loans, though, is mandatory mortgage insurance, paid both annually and upfront at closing.
VA loans are backed by the VA for eligible active-duty and veteran military service members and their spouses. These loans don’t require a down payment, but some borrowers may pay a funding fee. VA loans are offered through private lenders, and come with a cap on lender fees to keep borrowing costs affordable.
USDA loans help moderate- to low-income borrowers buy homes in rural areas. You must purchase a home in a USDA-eligible area and meet certain income limits to qualify. Some USDA loans do not require a down payment for eligible borrowers with low incomes.
12. Miscalculating the hidden costs of homeownership
If you had sticker shock from seeing your new monthly principal and interest payment, wait until you add up the other costs of owning a home. As a new homeowner, you’ll pay for property taxes, mortgage insurance, homeowners insurance, hazard insurance, repairs, maintenance and utilities, to name a few.
A recent Bankrate.com survey found that the average homeowner pays $2,000 annually on maintenance services. Not having enough cushion in your monthly budget — or a healthy rainy day fund — can quickly put you in the red if you’re not prepared.
What to do instead: Your agent or lender can help you crunch numbers on taxes, mortgage insurance and utility bills. Shop around for insurance coverage to get compare quotes. Finally, aim to set aside at least 1 percent to 3 percent of the home’s purchase price annually for repairs and maintenance expenses.
13. Not lining up gift money
Many loan programs allow you to use a gift from a family, friend, employer or charity toward your down payment. Not sorting who will provide this money and when, though, can throw a wrench into a loan approval.
“The time to confirm that the Bank of Mom and Dad is ready, willing and able to provide you with help for your down payment is before you start home shopping,” says Dana Scanlon, a Realtor with Keller Williams Capital Properties in Bethesda, Maryland. “If a buyer ratifies a contract to purchase a home with an understanding that they will be getting gift money, and the gift money fails to materialize, they can lose their earnest money deposit.”
What to do instead: Have a frank discussion with anyone who offers money as a gift toward your down payment about how much they are offering and when you’ll receive the money. Make a copy of the check or electronic transfer showing how and when the money traded hands from the gift donor to you. Lenders will verify this through bank statements and a signed gift letter.
14. Not negotiating a homebuyer rebate
The concept of homebuyer rebates, also known as commission rebates, is an obscure one to most first-time buyers. This is a rebate of up to 1 percent of the home’s sales price, and it comes out of the buyer agent’s commission, says Ben Mizes, founder and CEO of Clever Real Estate based in St. Louis, Missouri.
Homebuyer rebates are available in most U.S. states, but not all. Ten states prohibit homebuyer rebates: Alaska, Alabama, Iowa, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon and Tennessee.
What to do instead: If you live in a state that allows homebuyer rebates, see if your agent is willing to provide this rebate at closing. On a $300,000 home purchase, this can be a $3,000 savings for you so it’s worth asking.
I wanted to present an excellent program that might be of interest to you! Key Masters Real Estate has a Lease Purchase Program through Home Partners of America. A summary of the main points follow: 1. We show you homes that are currently for sale and on the market. 2. You select the home that you are interested in. 3. Home Partners of America purchases the home for cash. 4. You must qualify for the rental amount and agree to lease for a period of at least 1 year. 5. Then you have the option and right to purchase the home for 5% over the original purchase price. There are some other fees that HP charges… but this gives you a great option to lock in a price with an escalating real estate market. You also have the option to continue to rent and then purchase in the next few years. The purchase price goes up 5% each year. Home Partners is pet friendly and will accept up to 3 dogs! If you are interested, please contact me and I will send you more information on this exciting program! It’s great to have options and it opens up a lot of them for you!
As a Denver Native, I’m excited to help buyers and sellers in the metro Denver real estate market. Since I was born here and spent most of my life living here, I know I can help you either find a home in a location convenient to what’s important to you or help you find a buyer that will love your home as you have. Want a home near a great yoga studio? Want that fantastic gym? Want to ride horses? Like hearing the roar of dragsters at the drag strip or want to avoid the slightest noise? Feel free to contact me at “Lara@westandmainhomes.com” for all your real estate needs and follow me on social media for the latest updates and information. Allow me to serve you with dedicated attention and let’s reach for those goals you’ve set for the new year. I am excited to provide our services to help you sell your current home, buy your next home or both. Looking forward to working with you!