Alternatives to Putting 20 Percent Down on a Home

If you can’t afford a hefty down payment, here are your options.

Falling short of a 20 percent down payment shouldn’t prevent from purchasing the home you desire. You have some excellent options.

It’s a mantra often repeated in the real estate industry: If you want to buy a house, you need a 20 percent down payment. But with the average house in the U.S. costing $311,400 as of December 2013, according to the Census Bureau, all one has to do is the math to get a coronary. Raising a 20 percent down payment isn’t an easy thing to do.

Fortunately, you don’t have to. “It’s a myth that all homebuyers must have a 20 percent down payment to buy a home,” says Nancy Herrera-Siples, a Riverside, Calif., branch manager at Primary Residential Mortgage.

“Putting less than 20 percent is OK with most banks,” agrees Christopher Pepe, president of Pepe Real Estate in Brooklyn, N.Y. So why do you constantly hear that you need to put 20 percent down? Because if you don’t, it usually means you’ll have to shell out money for either private mortgage insurance or government insurance, which is usually financed by the Federal Housing Administration. Mortgage insurance protects the lender in case you can’t make your payments and the house is foreclosed on. But PMI payments don’t last forever. When your loan-to-value ratio is 80 percent, you can ask the lender if you can stop paying PMI; at 78 percent, the lender is required to cancel it.

[Read: How Much Will That Low Down Payment Cost You?]

Still, PMI can easily cost a couple hundred dollars a month, assuming your house is valued in the neighborhood of $200,000. Pepe says the average he sees is $700 a month just for PMI. But keep in mind that he’s based in New York City, which boasts one of the highest costs of living in the country.

So if you really want a house and you’re looking for alternatives to putting 20 percent down, here’s what you need to know.

Figure out financing before looking for a house. There are numerous programs that will help you buy a home without 20 percent down, says Dan Smith, president of Private Mortgage Solutions, a mortgage bank in Atlanta.

But, Smith adds, “All of these programs have various lender, property and borrower qualify requirements and restrictions. A knowledgeable mortgage banker or mortgage originator should be able to provide assistance and details.”

You’ll have to hook up with a lender eventually, and Smith suggests doing it early. “Don’t pick a property and then work backward toward financing,” he advises. “You’ll only frustrate yourself.”

Another reason to have a mortgage banker in your corner: “Lenders can layer programs to help each borrower overcome dilemmas,” Herrera-Siples says, citing common problems like not having a down payment or needing lower monthly payments.

Try your own bank first. This is advisable especially if you have a good relationship with the bank, says Amanda Monette, a real estate lending officer with Rockford Bank & Trust in Rockford, Ill. “You may have a better shot of getting a loan, even if you don’t have the money for a down payment.”

[Read: 10 Easy Ways to Save for a Down Payment.]

If you do all of your banking at your local bank, including investments and a savings account, Monette says this will work your favor. “Extra points,” she says, “if your parents, grandparents and other relatives bank with the same institution as you do. A banker may be more willing to go the extra mile because he or she knows you and your family and knows that you will be a good risk.”

Some common but unconventional routes you might take. “There are a variety of options available to consumers,” Smith says, citing the FHA, which offers mortgages in which the homeowner can put as little as 3.5 percent down. “The [U.S. Department of Agriculture] offers a program that allows buyers to purchase a qualified property with zero down. And many conventional leaders will allow subordinate financing to bridge the gap between the down payment and first mortgage loan amount.”

But, of course, there’s no free lunch, and some of these unconventional roads lead to an expensive toll booth. For instance, FHA loans, which were once considered great loans for first-time, low-income homebuyers, are much more expensive than they used to be because of mortgage insurance. With subordinate financing, you’re taking out another loan to make up for not having the 20 percent down payment, and the second loan often has a higher interest rate than the first. Make sure the math works out so that you’re not paying more in the long run than if you paid the PMI.

USDA loans, available for people who want to purchase a home in an area considered rural, are generally still well-regarded and coveted by many homeowners with incomes considered low to moderate. There are a range of limits depending on the type of USDA loan you’re eligible for and state you live in, as well as a lot of criteria to meet. For example, if you are part of a Colorado family with one to four people and a household income of around $70,000 or less, you’d probably qualify.

Check with your state. While you’re figuring out how to finance your home, don’t forget that your state may have loan programs to help homeowners – especially first-time buyers.

[See: A Step-by-Step Guide to Homebuying.]

For instance, Illinois recently announced its “Welcome Home Illinois” program, in which first-time buyers or people who haven’t owned a house in Illinois within three years can get $7,500 in down payment assistance with an interest rate as low as 3.99 percent for a 30-year fixed rate mortgage. It’s aimed at working class families – a family of three in Chicago can earn as much as $106,000 in annual household income and qualify. In other parts of the state where the cost of living is lower, the same family of three can earn no more than $82,915 to qualify. And the homebuyer must have a credit score of at least 640.

Whatever you do, don’t get too cute. If you don’t have the 20 percent, it may be best to keep saving until you reach that amount, or at least get closer to it. Just because you find a way to finance your move-in doesn’t mean you should take it. You want have enough left over in your budget to enjoy your house, not worry every month about how you’re going to pay the mortgage. In other words, you can liveunder a roof without 20 percent down – but is the alternative something you can live with?

Market Update-August 2014

Median home prices rebounded in both King and Snohomish counties in Sept after a significant drop in August. Except for Skagit Co.the market appears to be stabilizing. Below are figures for our 4 county areas showing the current median prices and appreciation from Aug 2013 to Aug 2014. Figures courtesy of NWMLS.
County Median price 12 mo appreciation
King $420,000 up 9.1 %
Snohomish $310,000 up 8.8 %
Pierce $225,000 up 2.3%
Skagit $216,500 Down 7.8%

Down Payment Assistance Grant Program!!-This truly is FREE MONEY for qualified buyers

HomeStreet Bank recently partnered with NHF Platinum (National Homebuyers Fund) to offer a new Down Payment Assistance Grant program!!

This program is similar to Washington State Housing and Finance Commission Loans (WSHFC) for underwriting purposes but the Grant is forgiven at closing and does not need to be repaid!  This truly is FREE MONEY for qualified buyers.

Quick Look…

–Grant – FREE MONEY!!

–This money is truly non-repayable and is forgiven at closing, there is no lien on title like WSHFC loans.

–FHA, VA – up to 5% of loan amount

–this would cover all of Down Payment for FHA and most of the closing costs.

–USDA – up to 3% of loan amount

–this would cover all out of pocket expenses

–Conventional – up to 3% of loan amount (for a 5% down Conv loan)

–this would cover a portion of their down payment

–Income Limits…Snohomish and King Counties

–$94,000 FHA, VA USDA – similar to WSHFC (only $3000 less)

–$115,000 Conventional

–Total Household Income – NHF/CHF does NOT use Total Household Income for income limit calculation, they only use the borrower(s) income.

–640 minimum FICO for FHA, VA, USDA.  740 minimum FICO for Conventional.

–Homebuyer education required

–DO NOT need to be a first time buyer, can own another property and qualify

Comparison:

WSHFC Home Advantage FHA Loan

$300,000 Purchase Price, 4.625% 30yr Fixed FHA Interest Rate, $2187/mo total payment (including escrow & MI), $4570 cash for closing (including Down Payment Assistance)

–Equity after closing is negative 2.16%.  This is due to the down payment assistance option that shows as a 2nd lien payable when they sell or transfer title.

NHF/CHF Platinum FHA Loan

$300,000 Purchase Price, 4.75% 30yr Fixed FHA Interest Rate, $2209/mo total payment (including escrow & MI), $4574 cash for closing (including Down Payment Assistance)

–Equity after closing is positive 1.75%.  This is due to the down payment assistance Grant not showing as a 2nd lien, it is forgiven at closing.

As you can see, the rate is slightly higher for NHF/CHF Platinum which increases the payment by $22/mo but your buyers are in positive equity position right away by forgiving the Down Payment Assistance Grant.

Why Rent When You Can Own!

September 18, 2014 at 6:00 AM

Census: Seattle saw steepest rent hike among major U.S. cities

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fyiguy-risingrents-cClick to enlarge

Seattle apartment-dwellers: You thought your rent was high — well, you’re right.

Data released Thursday by the Census Bureau rank Seattle — for the first time — among the 10 most-expensive cities for renters.

To achieve that dubious honor, we had to claw our way past Oakland and Long Beach, Calif., on the list of high-priced places to live.

So how’d we do it?

Simple. Between 2010 and 2013, Seattle renters took a bigger hit to their pocketbooks than renters in any other large U.S. city. The gross median rent here — that is, rent plus utilities — spiked by $113, or nearly 11 percent. That’s the sharpest rise in rent among the nation’s 50 most-populous cities.

Seattle is the only large city where rents jumped by more than $100, and by more than 10 percent, in this period.

The median amount paid by Seattle renters, across all size units, reached $1,172 in 2013. The census data also show that three out of five Seattle apartments now rent for more than $1,000.

Last week on FYI Guy, we explored data about people leaving Seattle — maybe they’re in search of cheaper rent?

fyiguy-risingrents-mapClick to enlarge

But if that’s your goal, forget about fleeing to the Eastside.

Rents in Bellevue rose even more dramatically than they did in Seattle, jumping by $152 between 2010 and 2013. The median rent there now stands at $1,494 — that’s $3 higher than San Francisco, believe it or not.

The census data also show that Seattle’s apartment-dwelling population reached 307,000 in 2013 — a 13 percent increase since 2010. So while it may not be cheap to rent here, that certainly isn’t keeping people away.

CENTURY 21 REAL ESTATE SWEEPS J.D. POWER 2014 HOME BUYER/SELLER SATISFACTION STUDY

CENTURY 21 REAL ESTATE SWEEPS J.D. POWER 2014 HOME BUYER/SELLER SATISFACTION STUDY

MADISON, N.J. (August 6, 2014) – CENTURY 21 Real Estate, the iconic brand with the world’s largest real estate franchise sales organization, announced that it has been ranked highest in overall customer satisfaction by the J.D. Power 2014 Home Buyer/Seller Satisfaction StudySM, released today. Specifically, CENTURY 21® Real Estate swept the awards by receiving the highest ranking among national real estate companies across all four customer satisfaction segments in the study, including: First-Time Home-Buyer Satisfaction, Repeat Home-Buyer Satisfaction, First-Time Home-Seller Satisfaction and Repeat Home-Seller Satisfaction.

“CENTURY 21 sales professionals understand that real estate is about developing relationships and building trust with their customers. Customer satisfaction is at the core of everything that they do each and every day,” said Rick Davidson, president and chief executive officer, Century 21 Real Estate LLC. “Our brand reputation is earned and measured with every customer interaction, and these J.D. Power results showcase the quality of our franchise broker network and their affiliated sales professionals.”

The study, now in its seventh year, measures customer satisfaction among first-time and repeat home buyers and sellers with the nation’s largest real estate companies. Overall satisfaction is measured across four factors of the home-buying experience: agent/salesperson; real estate office; closing process; and variety of additional services. For satisfaction in the home-selling experience, the same four factors are evaluated plus a fifth factor, marketing.

“The feedback from thousands of home buyers and sellers in this study shows that the dedication and commitment of the C21® System to caring about the consumer, delivering excellent service and establishing trust as a differentiator in the market,” said Bev Thorne, chief marketing officer, Century 21 Real Estate LLC. “This study comes at the culmination of three years of hard work and dedication to a strategic roadmap that our brokers have embraced since 2011. By focusing on the quality of their affiliated sales professionals, they have raised the bar for customer service.”

The 2014 Home Buyer/Seller Satisfaction Study includes 5,810 evaluations from 4,868 customers who bought and/or sold a home between March 2013 and April 2014. The study was fielded between March 2014 and May 2014.

Headquartered in Westlake Village, Calif., J.D. Power is a global marketing information services company providing performance improvement, social media and customer satisfaction insights and solutions. The company’s quality and satisfaction measurements are based on responses from millions of consumers annually. For more information, visit jdpower.com. J.D. Power is a business unit of The McGraw-Hill Companies.

CENTURY 21® Recognized with Highest Overall Customer Satisfaction

The Five Factors Driving Your Credit Score

When it comes to buying a home or refinancing your mortgage, one of the first things your lender will need is a credit report. Like most people, you probably have a general sense of whether or not you have good credit. If you routinely pay your bills late, or don’t pay them at all; you can expect your credit score to be low. However, if you’ve never missed a payment on a loan or any other bill, yet your credit score is still less than outstanding (meaning anything less than 750) you may not be sure why.

The three major credit reporting companies, Experian, TransUnion and Equifax all use similar basic criteria for determining credit. Here’s a look at the five factors that determine your credit score.

Payment History
Your payment history is incredibly important. In fact, your personal payment history accounts for as much as 35% of your overall credit score. Serious delinquencies in payments including foreclosures, short sales, repossessions and bankruptcies all drive your credit score down. Late payments will also have a negative impact, though their impact may not be as severe. Being 30 days late is always preferable to being 60 days late, and your more recent delinquencies will hurt your credit more than delinquencies from a few years ago.

If you’ve always been current with your payments, but found yourself making a late payment once or twice -perhaps due to being out of town or as the result of a personal emergency- pay the balance immediately. Once you’ve done so; call the creditor. They may be willing to delete the delinquency if your history shows that it was just a fluke.

Balances
Credit reporting companies will also base your credit score largely on your balances relative to your credit limits. Your existing balances will account for roughly 30% of your score. For example, if you only have one credit card with a limit of $10K, and you currently owe $9,500, the debt to availability ratio will drive down your score. However, if you have available credit on multiple cards of $40K, but only owe $9,500, your debt to availability is viewed more favorably by the reporting companies.

Credit History
The longer your credit history, the better. Credit reporting companies like to see that you’ve borrowed and paid back your loans consistently over time. It establishes a record of reliability that will drive your credit score up. To that end, if you have had a credit card for 10 years, but rarely use it; it’s still a good idea to keep the account open. Longevity of credit can count towards as much as 15% of your credit score, so it’s wise to maintain open lines of credit, even if the interest rates aren’t great.

Type of Credit
The type of credit you have on your report will account for 10% of your total credit score. Not all types of credit and/or loans are weighted equally. For example, department store or electronics store credit cards are generally provided through a finance company rather than your credit union or local bank. Borrowing from established financial institutions and banks is viewed more favorably than borrowing from finance companies.

Inquiries
Multiple inquiries into your credit will lower your credit. However, when you are shopping for a home loan or an auto loan, credit bureaus will understand that multiple inquiries within 10 days- 2 weeks may be necessary, and as such will only count the inquiries as a single “hit” to your credit. However, ongoing inquiries will result in negative “hits” on your credit, lowering your score. It’s not a good idea to keep opening lines of credit year round.

No matter what your credit score is currently; there are always ways to improve it

Market Update: June 2014

Year over  year appreciation ranges between 6-9% for all 4 counties Century 21 North Homes serve.

Below are figures for our 4 county area showing the current median prices and appreciation from May 2013 to May 2014.

Figures courtesy of NWMLS.

County Median price 12 mo appreciation
King $398,000 up 6.1 %
Snohomish $305,000 up 7.0 %
Pierce $215,000 up 9.0 %
Skagit $225,750 Up 6.1 %

Rates on 30-year mortgages down from last year

Freddie Mac: Rock-bottom rates should help with home affordability

For the second straight week, homebuyers enjoyed rates on 30-year fixed-rate mortgages that were lower than they were at the same time last year, Freddie Mac reported.

Rates on 30-year fixed-rate mortgages averaged 4.12 percent with an average point of 0.5 for the week ending July 3, down from 4.14 percent last week and 4.29 percent a year ago, according to Freddie Mac’s latest Primary Mortgage Market Survey.

Frank Nothaft, vice president and chief economist at Freddie Mac, said the rock-bottom rates should help with home affordability in many markets.

“Housing data was better with pending home sales up 6.1 percent in May and overall construction spending showing a slight improvement with private residential spending now up 7.5 percent on a yearly basis,” Nothaft said in a statement.

Rates on 15-year fixed-rate mortgages and five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans were unchanged, while rates on one-year Treasury-indexed ARMs declined.

Century 21 North Homes Volunteers With Veterans

Two weeks ago, the team from Century 21 North Homes in Puget Sound, WA spent the day volunteering with the Veterans Memorial Clean Up Project. Started by Rich Sundance, a veteran and former Century 21 System member, the project focuses on giving much needed care to veterans’ memorials in the Puget Sound area.

Rich works for Veterans Affairs as a counselor and his office is inside the Century 21 North Homes office. When he began the project, the Century 21 team was eager to help.

Scott Heiner of Century 21 North Homes shared, “Rich is very passionate about this cause. Everyone in the office knows Rich and his commitment to the project. We all wanted to help him and these veterans. Our people jumped at the opportunity.”

On Saturday, June 21st, a dozen members of the Century 21 North Homes team headed to Annacortes, WA to help spruce up Causland Memorial Park, along with local disabled veterans. Causland Memorial Park is the largest veterans memorial in the county. It was created in 1920 and needed some extra TLC after nearly 100 years of weather exposure.

Rich has organized a few veterans memorial clean ups, this being the fourth.  For each project he researches the type of medal the memorial is made of so the volunteers can use the right cleaning solution to spruce, without causing any damage.

Rich explained, “There are monuments all over the country that have never seen any care. I’ll never stop doing this. I have three more on my radar right now. “

Over the weekend, 50 volunteers participated in the clean up at Kaufland Memorial Park.  The Century 21 North Homes team volunteers together several times per year, including activities in support of Easter Seals. The office is ranked #12 in the Century 21 System for donations to Easter Seals.

2013 Market Recap

2013 Real Estate from the Rear View Mirror:

  • Closed sales: Northwest MLS broker-members reported 75,517 closed sales valued at nearly $25.5 billion
  • Median Price: $270,000 for single-family homes and condos that sold last year, up 10.2 percent from 2012
  • Inventory Increase: (+14%) from 2012. MLS members added 104,168 new listings of SFH and condos to inventory, an increase of 12,809 from 2012
  • Brokers Represented: 21,946 home sellers, on average, each month
  • Priced at $1 million or more: Reported 1,621 sales of single family homes and 137 sales of condominiums. 732 condos sold for $500,000 or more
  • Highest number of million dollar-plus sales:The MLS area covering Bellevue/West of 405 with 237, followed by Central Seattle with 193.
  • For high-end condos ($500,000-plus): The area covering West Bellevue reported the highest number of sales (180), followed by Belltown/Downtown Seattle with 171
  • Highest prices: Among the 21 counties in the MLS service area, King County claimed the highest median price for single family homes that sold last year ($415,000)
  • New construction: The median price for 8,298 newly built single-family homes that sold in 2013 area wide was $325,000; for 846 condo sales it was $350,214.
  • About half (49.1 percent) of single family homes that sold system-wide last year had 3 bedrooms
  • Condos: Brokers sold 10,395 condominiums during 2013; about two-thirds (64 percent) of condo sales system-wide were in King County; nearly 77 percent had two or fewer bedrooms
  • Prices, 3-bedrooom homes: The median price for a 3-bedroom home that sold in 2013 was $250,000; median prices on these homes ranged from a low $128,000 inPacific County to $450,000 in San Juan County
  • Most expensive: The highest priced single family home that sold was in Medina ($9.75 million); the highest priced condo was a downtown Seattle penthouse ($6.2 million)
  • INTEREST RATES UP: Rates Increased Across the board but are still low by historical standards
    - January 2013 Average 30 year fixed rate was 3.41% (according to Freddie Mac)
    - November 2013 Average 30 year fixed rate was 4.26% (according to Freddie Mac)

Call or email us today for all your Real Estate needs

2013 Median Price County Map

Closed Sales Single Family Homes Only