No… You Do Not Need 20% Down to Buy NOW!

No… You Do Not Need 20% Down to Buy NOW! | MyKCM

The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.

This brings us to two major misconceptions that we want to address today.

1. Down Payment

NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with a down payment of 3% or less.

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.

2. FICO® Scores

An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores of approved conventional and FHA mortgages are much lower.

The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724. The chart below shows the distribution of FICO® Scores for all loans approved in August.

No… You Do Not Need 20% Down to Buy NOW! | MyKCM

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.

Which Homes Have Increased in Value the Most?

Which Homes Have Increased in Value the Most? | MyKCM

Home values have risen dramatically over the last twelve months. The latest Existing Home Sales Report from the National Association of Realtors puts the annual increase in the median existing-home price at 5.6%. CoreLogic, in their most recent Home Price Index Report, revealed that national home prices have increased by 6.7% year-over-year.

CoreLogic broke appreciation down ever further into four price ranges which gives a more detailed view than simply looking at the year-over-year increases of the national median home price.

The chart below shows the four tiers and each one’s growth from July 2016 to July 2017 (the latest data available).

Which Homes Have Increased in Value the Most? | MyKCM

It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor in determining how much it has appreciated over the course of the last year. Lower priced homes have appreciated at greater rates than homes at the upper ends of the spectrum, due to demand from first-time home buyers and baby boomers looking to downsize.

Bottom Line

If you are planning on listing your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.

Buying a Home Can Be Scary… Unless You Know the Facts

Buying a Home Can Be Scary... Unless You Know the Facts [INFOGRAPHIC] | MyKCM

Some Highlights:

Many potential homebuyers believe that they need a 20% down payment and a 780 FICO® score to qualify to buy a home, which stops many of them from even trying! Here are some facts:

  • 40% of millennials who purchased homes this year have put down less than 10%.
  • 76.4% of loan applications were approved last month.
  • The average credit score of approved loans was 724 in September.

How Your Home’s Value Grows Your Family’s Wealth

How Your Home’s Value Grows Your Family’s Wealth | MyKCM

Over the next five years, home prices are expected to appreciate 3.64% per year on average and to grow by 18.4% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.

So, what does this mean for homeowners and their equity position?

As an example, let’s assume a young couple purchased and closed on a $250,000 home in January. If we look at only the projected increase in the price of that home, how much equity will they earn over the next 5 years?

How Your Home’s Value Grows Your Family’s Wealth | MyKCM

Since the experts predict that home prices will increase by 5.0% this year alone, the young homeowners will have gained $12,500 in equity in just one year.

Over a five-year period, their equity will increase by nearly $49,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.

Bottom Line

Not only is homeownership something to be proud of, but it also offers you and your family the ability to build equity you can borrow against in the future. If you are ready and willing to buy, find out if you are able to today!

Homeowner’s Net Worth Is Still Greater Than a Renter’s

Homeowner’s Net Worth Is Still Greater Than a Renter’s | MyKCM

Every three years, the Federal Reserve conducts their Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400). 

The latest survey data, covering 2014-2016 will be released later this year. In the meantime, Lawrence Yun, the National Association of Realtors’ Chief Economist estimates that the gap has widened even further, to 45 times greater ($225,000 vs. $5,000)! 

Put Your Housing Cost to Work for You

As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth. Every time you pay your rent, you are contributing to your landlord’s net worth.

The latest National Housing Pulse Survey from NAR reveals that 84% of consumers believe that purchasing a home is a good financial decision. William E. Brown comments:

“Despite the growing concern over affordable housing, this survey makes it clear that a strong majority still believe in homeownership and aspire to own a home of their own.Building equity, wanting a stable and safe environment, and having the freedom to choose their neighborhood remain the top reasons to own a home. 

Bottom Line

If you are interested in finding out if you could put your housing cost to work for you by purchasing a home, let’s get together and evaluate your ability to buy today!

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.

The Cost of Renting vs. Buying in the US

The Cost of Renting vs. Buying in the US [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Historically, the choice between renting or buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (29.2%) vs. the percentage needed to buy a median-priced home (15.8%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!