One of the biggest hurdles that potential buyers have to overcome on the road to homeownership is saving for a down payment. Traditionally, you needed a 20% down payment in order to secure a loan and purchase a property. And for many people dreaming of buying property, this large up-front investment put homeownership out of their reach.
But times have changed. Depending on your creditworthiness, you might not need a 20% down payment to purchase a home. In fact, in some cases you don't even need a 10% down payment. According to the National Association of Realtors' Realtors Confidence® Index, 61% of first-time buyers in 2017 made a down payment of 6% or less.
Low-down-payment mortgage options, like FHA loans, are making the possibility of homeownership a reality for a new generation of potential homeowners who have the financial means to manage their mortgage payments but don't have the ability to stash away 20% of the total cost before making a purchase.
If you've been putting off homeownership because you're worried your savings account can't support a hefty down payment, start talking to lenders. Even if you don't have any money to put towards a down payment, the possibility of owning a home is within your reach.
According to a recent study by Zillow, owning a home is more affordable than renting in most metro markets across the United States. According to the study, renters pay an average of 29.1% of their household income towards rent, while homeowners only pay an average of 15.4% towards their mortgages. This means renting eats up nearly twice as much of your income as owning a home.
Data Source: Zillow
Thanks to rising rents, homeownership is becoming a more sensible option across the nation, and renters are taking notice. According to the National Association of Realtors' Realtors Confidence® Index, 39% of homebuyers from October 2016 to November 2017 were renting at the time of their purchase, which means that 39% of buyers made the transition from renter to homeowner. And many of them did so without breaking the bank on a down payment. In fact, 61% of first-time buyers made a down payment of 6% or less.
If you're currently renting, it's time to reevaluate your situation. Why throw away nearly 30% of your income on rent when you can spend almost half as much and have a home to show for it?
According to the National Associations of Realtors Homeownership and Market Experience (HOME) Survey, most Americans believe that now is the perfect time to become a homeowner. According to the survey, 72% of people believe now is a good time to buy.
This could be because of the changing economic situation. 52% of Americans surveyed believe the US economy is improving, and according to a recent Neighborworks survey, 81% of Americans believe owning a home will make them more financially stable.
It could also be because homeownership is still such a deeply ingrained part of the American culture. According to that same Neighborworks survey, a whopping 93% of people believe owning a home is a part of the American dream, with 18% claiming it’s the most important part.
And with so many new buyers flooding the market, it creates the perfect opportunity for sellers. With more people believing now is the time to buy, the market is struggling to keep up with demand. Low inventory, particularly in the starter home sector, creates more competition between buyers and can be a lucrative opportunity for sellers to get the most for their homes.
If it's your first time buying or selling real estate, you don't know what you don't know. There are tons of potential pitfalls and challenges along the way that it's hard to anticipate when you don't know what to expect. But luckily for you, most of the missteps taken by first time buyers and sellers are pretty universal, which means you can learn from their mistakes and avoid falling into the same traps. Here are four common real estate mistakes to avoid the first time you buy or sell a home:
1. Thinking you know the right price
The price of a home - whether you're buying or selling - is one of the most important components of a real estate transaction. But there's a lot more that goes into pricing than what meets the eye. Pricing a home is a kind of science. There are so many factors that come into play - time of year, current market conditions, how quickly homes are selling the neighborhood, the current value of the home. The real estate agent takes all of those factors into consideration when coming up with the right price for a home. Without a real estate background, it's impossible for you to understand all of those conditions and how they affect the price of a home. If you're selling, you're likely to think your home should sell for a higher price because of the value it holds for you. If you're buying, you're likely to think a property should sell for less because that means a better deal on your end. But ignoring your real estate agent's pricing advice because you think you know what the price of a property should be...
Every industry suffers from it -- overused, industry-specific jargon that everybody’s tired of hearing. You know, words and phrases that sounded cool way back when… but they’ve lost their luster. Here are the 25 most overused terms used in the real estate industry, as nominated by fellow agents.
1. "Will not last"
Credit: Nancy Judovits
Not to burst your bubble, but those 317 days on market are telling a different story, chachie.
2. "Seller says sell"
Credit: Kelly Provost
No way! I thought you had snuck this listing on MLS without their knowledge!
3. “Huge deck for entertaining”
Credit: Michelle Weadbrock
This is just one letter away from a whole heap of embarrassment. If real estate agents insist on using this one, it should be done with extreme caution.
4. "Bring your pickiest buyers"
Credit/photo: Aggie Sean
It’s not that this is the most horrible statement ever… it’s that it’s usually accompanied by a photo like this:
5. “Needs TLC”
Credit: Rhonda McMillion White
Thanks to Jeana Brinkerhoff & Mark Hawley for the acronyms