The Benefits of a 20% Down Payment

The Benefits of a 20% Down Payment | MyKCM

If you are in the market to buy a home this year, you may be confused about how much money you need to come up with for your down payment. Many people you talk to will tell you that you need to save 20% or you won’t be able to secure a mortgage.

The truth is that there are many programs available that let you put down as little as 3%. Those who have served our country could qualify for a Veterans Affairs Home Loan (VA) without needing a down payment.

These programs have cut the savings time that many families would need to compile a large down payment from five or more years down to a year or two. This allows them to start building family wealth sooner.

So then, why do so many people believe that they need a 20% down payment to buy a home? There has to be a reason! Today, we want to talk about four reasons why putting 20% down is a good plan, if you can afford it.

1. Your interest rate will be lower.

Putting down a 20% down payment vs. a 3-5% down payment shows your lender/bank that you are more financially stable, thus a good credit risk. The more confident your bank is in your credit score and your ability to pay your loan, the lower the rate they will be willing to give you.

2. You’ll end up paying less for your home.

The bigger your down payment, the lower your loan amount will be for your mortgage. If you are able to pay 20% of the cost of your new home at the start of the transaction, you will only pay interest on the remaining 80%. If you put down a 5% down payment, the extra 15% on your loan will accrue interest and end up costing you more in the long run!

3. Your offer will stand out in a competitive market!

In a market where many buyers are competing for the same home, sellers like to see offers come in with 20% or larger down payments. The seller gains the same confidence that the bank did above. You are seen as a stronger buyer whose financing is more likely to be approved. Therefore, the deal will be more likely to go through!

4. You won’t have to pay Private Mortgage Insurance (PMI)

Simply put, PMI is “an insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.”

As we mentioned earlier, when you put down less than 20% to buy a home, your lender/bank will see your loan as having more risk. PMI helps them recover their investment in you if you are unable to pay your loan. This insurance is not required if you are able to put down 20% or more.

Many times, home sellers looking to move up to a larger or more expensive home are able to take the equity they earn from the sale of their house to put down 20% on their next home.

If you are looking to buy your first home, you will have to weigh the benefits of saving a 20% down payment vs. the time and cost of continuing to rent while you save that amount.

Bottom Line

If your plan for your future includes buying a home and you’re already saving for your down payment, let’s get together to help you decide what down payment size best fits with your long-term plan!

 

Let Your Luck Run Out! Buy A Home This Spring [INFOGRAPHIC]

Don’t Let Your Luck Run Out! Buy A Home This Spring [INFOGRAPHIC] | My KCM

Some Highlights:

  • Interest Rates for a 30-year fixed rate mortgage have dropped to 4.41% from near 5% in 2018.
  • Take advantage of more inventory coming to market in the spring to find your dream home!
  • Buying now will allow you to start earning equity today!

 

 

 

What’s Going On with Bidding Wars?

What’s Going On with Bidding Wars? | MyKCM

In a strong seller’s market, like the one we have experienced over the past few years, bidding wars are common and expected. This makes sense! A seller’s market is defined as a market in which the inventory of homes for sale cannot satisfy the number of buyers who want to purchase a home.

According to the Cambridge English Dictionarybidding wars occur when two or more parties repeatedly outbid each other as they compete to purchase something- in this case, a home.

In some areas of the country, first-time buyers have been met with fierce competition throughout their experience. Some have been out-bid multiple times before finally winning a bid on a home to call their own.

According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), there is currently a 3.7-month supply of homes for sale.

With the current number of houses listed for sale and the level of demand from buyers, this means it would take 3.7 months for all the homes listed to sell if no additional listings came to market. Any supply number under a 6-month supply is considered a seller’s market. According to NAR, the housing market hasn’t had a 6-month supply of homes for sale since August 2012.

Good News for Buyers

A recent report shows that the percentage of houses sold including a bidding war before settling on a final price decreased from 53% in January of 2018 to 13% this year.

One reason for the decline is an influx of homes being listed for sale. Even though the month’s supply number is not increasing, the number of homes for sale is. The chart below shows the year-over-year change in inventory over the last 12 months.

What’s Going On with Bidding Wars? | MyKCM

 

As you can see, the number of homes for sale has started to build over the last eight months. Prior to this reversal, inventory levels had fallen for 36 consecutive months when compared to the year before.

Danielle Hale, realtor.com’s Chief Economist, gave some insight into why bidding wars are less common on a local level this year,

"[Last year] you might have been the only listing in your neighborhood, and you could put your home up at a certain list price and you would likely see multiple offers at or above that list price. That tide is turning this year.

It's going to depend on what neighborhood you're in, but we expect it to be more common this year that you won't be the only listing."

Inventory in the luxury and premium markets (the top 25% of listings in an area by price), is increasing at a greater rate than the starter home market. As the choices buyers have continued to increase, the likelihood of a bidding war will decrease.

Bottom Line

If you are debating listing your house for sale this year, you may not want to wait for additional competition as inventory continues to rise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
 
 

 

 

 

 

 

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 TOP 10 REASONS to LIST YOUR HOME DURING the HOLIDAYS....
 

1. People who look at property during the holidays are serious buyers and are more ready to make a decision.

2. Serious buyers usually have fewer houses to choose from during the holidays, so the property has less competition.

3. Houses “show better” when tastefully decorated for the holidays with the wonderful lights and festive colors associated with the season.

4. Buyers are more emotional during the holidays and often base their decision on the warmth and good feelings they receive when viewing the home.

5. Buyers have more time to look for a house during the holidays because they have designated time off from work to purchase a home.

6. Many people want to buy before the end of the year for financial and tax reasons.

7. January is traditionally the month for transfers. Transferees can’t wait until the spring to buy. These buyers need a home now and houses must be on the market to capture these buyers.

8. Sellers can restrict showings during personal family events and still take advantage of their homes being spruced up and decorated “show ready” property.

9. Sellers can sell now – but specify a delayed closing or extended occupancy until early next year if it is agreeable within the negotiations of the contract.

10. By selling now sellers have the opportunity to buy during the spring – when more properties are on the market.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mythical castle in the clouds

SPOTLIGHT

Home Myths Busted!

SEE THE FULL SPOTLIGHT
Money flying out of the roof of a home

You Only Think It’s True: 10 Myths Costing You Time and Money

Save your cash for more important things, like, you know, your mortgage.

Image: Patric Sandri/Offset

You can’t swing a tool belt without hitting a website or TV network offering tips on taking care of your digs. Save money by watering your lawn at night! No, water it in the morning! No, dig it up and replace it with a drought-hardy meadow!

Throw in the info you pick up from well-meaning friends and there’s a sea of home care truisms out there, some of which can sink your budget.

Myth 1: Stone Countertops Are Indestructible

 

A cracked gray and pink marble stone countertopImage: Marble Lite Inc.

 

Fact: Even rock can be damaged.

Marble, quartz, travertine, soapstone, and limestone can all be stained. Regular household cleaners can dull their surfaces over time. And marble is maddeningly fragile — it’s the prima donna of stone.

It’s easy to scratch. It’s easy to stain. Here’s the worst part: Mildly acidic substances like soda, coffee, lemon juice, even hard water will eat into marble, creating a cloudy, dull spot in a process known as etching.

“Spill a glass of wine on a marble counter and go to bed without cleaning it, the next morning you’ll have a problem,” says Louwrens Mulder, owner of Superior Stone in Knoxville, Tenn.

And while stone counters won’t crack under a hot pot, such direct heat can discolor quartz or marble, says Mulder. So be nice to your counters, no matter what they’re made of. And note that the best rock for your buck is granite. “It doesn’t stain or scratch. It’s tough because it’s volcanic rock,” Mulder says. Which means it can stand up to all the merlot and barbecue sauce you can spill on it.

Myth 2: Your Smoke Detector's Test Button Is Foolproof

Fact: The test button doesn’t tell you what you really need to know.

Yes, check your smoke detector twice a year. But all that test button will tell you is whether the alarm sound is working, not if the sensor that detects smoke is working. Pretty key difference there.

The best way to check your device is with real smoke. Light a long, wooden kitchen match, blow it out, and hold it near the unit. If the smoke sets off the alarm, it’s working. If not, replace the batteries. If it still doesn’t work, you need a new smoke detector. And replace those batteries once a year anyway, because dead batteries are the No. 1 reason smoke detectors fail.

Myth 3: Gutter Guards Are Maintenance-Free

Fact: You gotta clean gutter guards, too.

Gutter guards keep out leaves, but small debris like seeds, pine straw, and flower buds will still get through.

Gutter guards can lessen your work, though — sometimes a lot. Instead of shoveling out wheelbarrow loads of leaves and other crap twice a year, you might just need to clean them every two years. But if there are lots of trees in your yard, once a year might be necessary.

Related: Money-Saving Tips to Repair Those Dastardly Gutters

Myth 4: A Lemon Is a Great Way to Clean a Disposal

 

Lemons ready to be added to a disposalImage: Anne Arntson for HouseLogic

 

Fact: While wanting to use natural cleaners is admirable, all of them will damage your disposal and pipes over time.

The lemon’s acidic juice will corrode the metal parts of your disposal. The mixture of salt and ice contains metal-eating acid, too. The coffee grounds are abrasive enough to clean the gunk off the blades and make it smell like a cup of americano, but they’ll accumulate in pipes and clog them.

The best natural cleaner for your disposal is good old baking soda. It’s mildly abrasive so it will clean the blades, but it’s a base, not an acid, and won’t damage the metal. Best of all, a box with enough baking soda big enough to clean your disposal twice costs less than a buck.

Myth 5: Mowing Your Lawn Super Short Means You'll Mow Less Often

Fact: You might not have to mow as often, but your lawn will look like awful.

Cut that grass under an inch high, and you’ll never have to mow again because your grass will die. Mowing a lawn down to the root — a screw-up known as scalping — is like cutting all the leaves off a plant.

Grass blades make and store your lawn’s energy. Removing more than 1/3 of the length of the blade will leave your grass too weak to withstand weeds and pests. It also exposes the roots to the sun, causing the lawn to dry out quickly. Leave 1 to 3 inches of grass above the roots to keep your lawn lush.

Myth 6: CFLs Cost Too Much, and Are Dangerous

Fact: CFLs (compact fluorescent lights) have come down in price since they first hit the market and don’t contain enough mercury to cause any harm.

You can buy one now for as low as $3. And replacing one incandescent bulb with a CFL will save nearly $60 a year for the lifetime of the bulb, says Consumer Reports. CFLs last an average of 5 years, so one bulb can save $300. A houseful of them, say 20, will save $600 each year.

And CFLs are a safe option. They actually lower your exposure to mercury indirectly, because they use 70 percent less electricity than incandescent bulbs. That means the coal-fired power plants that spew 340 million pounds of mercury into the air each year won’t have to run as long to keep our houses lit. Fewer toxins, lower power bills. What’s not to love?

Myth 7: A Trendy Kitchen Re-Do Will Increase My Home's Value

 

Avocado green kitchenImage: Tate Gunnerson

 

Fact: Décor trends come and go as fast as viral videos.

Remember those Tuscan-style kitchens with mustard gold walls, ornate cabinets, and medieval-looking light fixtures that were the must-have of the late ‘90s and early aughts?

Today, they’re as dated as flip phones. Instead of remodeling in the latest look, which costs $22,000 on average, try repainting in on-trend colors, which costs $1,700 on average. If you do opt for a full remodel, choose elements like Shaker cabinets, wood floors, and subway tile, a timeless style you’ll love 10 years from now.

Related: 7 Bad Habits Homeowners Need to Quit Now

Myth 8: A Contractor Recommendation From a Friend Is Good Enough

Fact: Good contractors have more than just your buddy to vouch for them.

Your neighbor’s rec is a good start, but talk to a couple of sources before you hire anyone. Check the contractor’s reviews on Angie’s List or other online rating sites.

Ask a local building inspector which contractors meet code on the properties they inspect. Ask the contractor for the names of past clients you can talk to, how many other projects they have going, how long they’ve worked with their subcontractors, and if they routinely do projects the size of yours.

Look at this as a job interview where the contractor is an applicant and you’re the hiring manager. Make them show you they’re the guy or gal for the work.

Related: 5 Secrets Your Contractor Doesn’t Want You to Know

Myth 9: Turning Off Your AC When You Leave Saves Energy

Fact: Turning off the air conditioner when you leave could actually cost you money.

That’s because when you turn it back on, all your savings will be lost as the unit works overtime to cool your hot house. A better way to save on utilities is to turn the thermostat up or down (depending on the season) 5 to 10 degrees when you leave, says home improvement expert Danny Lipford of todayshomeowner.com.

And the best option? “Install a programmable thermostat,” he says. Even better, buy one you can control remotely with your smartphone and adjust the temperature before you get home. Because thermostats you have to touch are so 1998.

Myth 10: Permits? We Don't Need No Stinkin' Permits

Fact: You do.

Let’s say your neighbor’s brother-in-law, Cecil, is an electrician. Cecil can rewire your kitchen in a weekend because he won’t inconvenience you with a permit. Should you hire Cecil? No. Building codes protect you. From Cecil. Getting a permit means an inspector will check his work to make sure he didn’t screw up.

Plus, if your house burns down in an electrical fire and your insurance company finds out the work was done without a permit, they won’t cover your loss. Check with your local planning or building department to find out if your project needs a permit. If it does, get one.