Home Buying Myths

Home Buying Myths Slayed [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Interest rates are still below historic numbers.
  • 88% of property managers raised their rent in the last 12 months!
  • The credit score requirements for mortgage approval continue to fall.

Homeowners: Your Home Must Be Sold TWICE

Homeowners: Your Home Must Be Sold TWICE | MyKCM

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 5%+ over the next twelve months. One major challenge in such a market is the bank appraisal.

If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), the disparity between what a homeowner who is seeking to refinance their home believes their house is worth, as compared to an appraiser’s evaluation of that same home.

“While a 1 or 2 percent difference in home value opinions may not seem like a lot, it could be enough to derail a mortgage.

A homeowner [or a buyer] could be forced to bring more cash to closing in order to make a mortgage work if the appraisal is lower than expected. On the other hand, if an appraisal comes in higher, they could be surprised with more equity than they had planned. Either way, if owners are aware of their local markets it will lead to smoother mortgage transactions.”

The chart below illustrates the changes in home price estimates over the last 12 months.

Homeowners: Your Home Must Be Sold TWICE | MyKCM

Bottom Line

Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to discuss this and any other obstacle that may arise.

2 Myths Holding Back Home Buyers

2 Myths Holding Back Home Buyers | MyKCM

In Realtor.com’s recent article, “Home Buyers’ Top Mortgage Fears: Which One Scares You?” they mention that “46% of potential home buyers fear they won’t qualify for a mortgage to the point that they don’t even try.”

Myth #1: “I Need a 20% Down Payment”

Buyers overestimate the down payment funds needed to qualify for a home loan. According to the First Quarter 2017 Homeownership Program Index (HPI) from Down Payment Resource, saving for a down payment was the barrier that kept 70% of renters from buying.

Rob Chrane, CEO of Down Payment Resource had this to say,

There are many mortgage-ready renters today, but they don’t know it. Often, homebuyers remain sidelined for years due to the down payment.

Many believe that they need at least 20% down to buy their dream home, but programs are available that allow buyers put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO® score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

2 Myths Holding Back Home Buyers | MyKCM

As you can see in the chart above, 53.2% of approved mortgages had a credit score of 600-749.

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.

What Would You Sacrifice to Save For Your Next Home?

What Would You Sacrifice to Save For Your Next Home? [INFOGRAPHIC] | MyKCM

Some Highlights:

  • 95% of first-time homebuyers are willing to sacrifice to make homeownership a reality.
  • The top item that buyers sacrifice is new clothes, at 54%.
  • Even repeat or experienced buyers say they sacrificed taking a vacation or buying a new car to buy their last home.

Your Tax Return: Bring it Home

Your Tax Return: Bring it Home | MyKCM

This time of year, many people eagerly check their mailboxes looking for their tax return check from the IRS. But, what do most people plan to do with the money? GO Banking Rates recently surveyed Americans and asked the question – “What do you plan on doing with your tax refund?”

The results of the survey were interesting. Here is what they plan to do with their money:

  • 41% – Put it into savings
  • 38% – Pay off debt
  • 11% – Go on a vacation
  • 5% – Make a major purchase (car, home, etc.)
  • 5% – Splurge on a purchase

Upon seeing the research, The National Association of Realtors (NAR) wondered if this could help with a constant challenge cited by many people who wish to purchase a home – saving for the down payment.

In a recent post in NAR’s Economists’ Outlook Blog, they explained:

“With a sizable tax refund, the average American would have a decent down payment depending on which region or market you live in.”

They went on to add:

“[A]pproximately 5 percent of all respondents indicated they would make a major purchase which does not seem like a lot. However, there is a bigger group 41 percent who see saving the tax return is best and that group could be potential homebuyers if they are not already.”

In other words, putting that money toward purchasing a home is a form of savings.

Bottom Line

When one considers that first-time home buyers in 2016 had an average down payment of 6%, a decent tax return could go a long way toward the necessary funds needed for a down payment on a house. Or perhaps, the down payment needed by a son or daughter to make their homeownership dream a reality. How are you going to spend your return?

How Fast Can You Save for a Down Payment?

How Fast Can You Save for a Down Payment? | MyKCM

Saving for a down payment is often the biggest hurdle for a first-time homebuyer. Depending on where you live, median income, median rents, and home prices all vary. So, we set out to find out how long would it take you to save for a down payment in each state?

Using data from the United States Census Bureau and Zillow, we determined how long it would take, nationwide, for a first-time buyer to save enough money for a down payment on their dream home. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their monthly housing expense.

By determining the percentage of income spent renting a 2-bedroom apartment in each state, and the amount needed for a 10% down payment, we were able to establish how long (in years) it would take for an average resident to save enough money to buy a home of their own.

According to the data, residents in Iowa can save for a down payment the quickest in just under 2 years (1.99). Below is a map created using the data for each state:

How Fast Can You Save for a Down Payment? | MyKCM

What if you only needed to save 3%?

What if you were able to take advantage of one of Freddie Mac’s or Fannie Mae’s 3% down programs? Suddenly, saving for a down payment no longer takes 5 or 10 years, but becomes attainable in a year or two in many states as shown in the map below.

How Fast Can You Save for a Down Payment? | MyKCM

Bottom Line

Whether you have just started to save for a down payment, or have been saving for years, you may be closer to your dream home than you think! Let’s meet up so I can help you evaluate your ability to buy today.

Home Mortgages: Rates Up, Requirements Easing

The media has extensively covered the rise in mortgage interest rates since last fall (from 3.42% last September to the current 4.1% according to Freddie Mac). However, a less covered aspect of the mortgage market is that requirements to get a mortgage have eased while rates have risen.

The Mortgage Bankers Association (MBA) quantifies the availability of mortgage credit each month with their Mortgage Credit Availability Index (MCAI). According to the MBA, the MCAI is:

“A summary measure which indicates the availability of mortgage credit at a point in time.”

The higher the index, the easier it is to get a mortgage. Here is a chart showing the MCAI over the last several months as rates have increased.

Home Mortgages: Rates Up, Requirements Easing | MyKCM

Have requirements for attaining a mortgage actually eased?

Yes. Here are two examples:

  1. FICO® Score – the credit score which helps determine a buyer’s eligibility. The score required to attain a mortgage has been falling over the last five months:

Home Mortgages: Rates Up, Requirements Easing | MyKCM

  1. Down Payment Requirement – the percentage of the purchase price necessary to place as a down payment on a home. To make this point, let’s look at the percentage of first-time buyers who have put less than 5% down over the last several years as compared to the 1st quarter of 2017:

Home Mortgages: Rates Up, Requirements Easing | MyKCM

Bottom Line

Whether you are a current homeowner looking to move to a home that will better serve your family’s current needs, or a first-time buyer looking for a starter home, it is easier to get a mortgage today than it has been at any other time in the last ten years.  There are many low down payment options to take advantage of.