Administrator
Nathan Ross
Concerns greatest margaret him absolute entrance nay. Door neat week do find past he. Be no surprise he honoured indulged. Unpacked endeavor six steepest had husbands her. Painted no or affixed it so civilly. Exposed neither pressed so cottage as proceed at offices. Nay they gone sir game four. Favourable pianoforte oh motionless excellence of astonished we principles. Warrant present garrets limited cordial in inquiry to. Supported me sweetness behaviour shameless excellent so arranging.
HomeParentingWant to buy a home? Do the math
post image

Want to buy a home? Do the math

Mar 16, 2019 - 16:55
728x90-ad-unit
468x60-ad-unit

It is a common misconception that a 20 percent down payment is required to buy a home. Advice to wait and save a large down payment is often based on the theory that the cost of mortgage insurance (MI), which is required when you buy with a smaller down payment, should be avoided. This may not be the best advice and is, in fact, not in line with market trends, considering the median down payment for first-time homebuyers is 7 percent, according to the National Association of Realtors.

Yes, you can qualify for a conventional mortgage with a down payment as small as 3 percent of the purchase price. It is also true that you can reduce your monthly mortgage payment by paying for discount points at closing, but that can be 5 or 10 percent of the purchase price — not 20. And because every buyer’s situation is unique, it’s important to do the math. In today’s market, it could take a family earning the national median income up to 20 years to save 20 percent, according to calculations by U.S. Mortgage Insurers using a methodology developed by the Center for Responsible Lending; a lot can change during that time, in the family’s personal finances and in overall mortgage market trends.

How can buying now save you money later?

Consider you want to purchase a $255,000 home. A 5 percent down payment is $12,750 versus $51,000 in cash for 20 percent down. With a 740 credit score at today’s MI rates, your monthly MI payment would be about $110, which is added to your monthly mortgage payment until MI cancels. MI typically cancels after five years; therefore, you will only have this added cost for a short period of time versus waiting an average of 20 years to save for 20 percent.

With home price appreciation, today’s $255,000 home will likely cost more in the years ahead and this will also have an impact on the necessary down payment and length of time required to save for it. There are other variables in the equation too, such as interest rates. As federal rates rise from their historic lows, so too will the costs associated with financing a mortgage. The savings a borrower might calculate today could be altogether negated by waiting even a few more years. Another factor is that rents are on the rise across the nation, leading to a reduced capacity for many would-be homebuyers to save for larger down payments.

If you decide to buy today with a low down payment mortgage that has private MI, keep in mind that the monthly MI payments are temporary and go away, lowering the monthly payment over time. Again, private MI typically lasts about five years as it can be cancelled once a homeowner builds approximately 20 percent equity in the home through payments or appreciation and automatically terminates for most borrowers once he or she reaches 22 percent equity. Importantly, the insurance premiums on an FHA mortgage — a 100 percent taxpayer-backed government version of mortgage insurance — cannot be cancelled for the vast majority of borrowers.

So, do the math and let the numbers guide you. There are many online mortgage calculators that can help. Check out lowdownpaymentfacts.org to learn more.

728x90-ad-unit
468x60-ad-unit
5 tips for avoiding the cold & flu this year
Tips for managing the flu without making others sick.
Getting the care you need: Find your health care 'quarterback'
Why you should add a geriatrician to your health care team.
Resolutions, meet reality: Ways to stay healthy throughout the year
5 tips for healthful, realistic changes.
Farming program helps neighbors in rural America fight hunger
Breaking barriers to win the war against hunger in rural America.
728x90-ad-unit
468x60-ad-unit
or to write a comment
250x250-ad-unit
250x250-ad-unit
Random posts
Budget checkup for homeowners and future homeowners
Budgets are important tools for first-time and long-time homeowners....
Survey reveals mistakes, misconceptions about formula feeding infants
4 common misconceptions about formula feeding....
Top Three Kitchen Advancements for Today's Technicurean Home Chefs
Top 3 advancements for today's progressive home chefs....
Three Ways to Understand and Help Manage Rare Blood Cancers
3 ways to understand and manage rare blood cancers....
250x250-ad-unit
Archive