Friday, November 13, 2015

How to buy a home without a 20% down payment

Don't have tens of thousands of dollars in savings? That doesn't mean there's no hope of becoming a homeowner.

Home prices are on the rise, making it harder for buyers to cobble together a 20% down payment.
With the national average listing price for a four-bedroom, two-bathroom home at $302,632, according to Coldwell Banker Real Estate, home buyers need to come up with $60,526 to put 20% down.
But there are options for buyers who don't have that kind of cash sitting in the bank.
1. Apply for an FHA loan
The Federal Housing Administration backs mortgages that require as little as 3.5% down.
Anyone can apply, though you'll usually need good credit.
There are a few downsides though. For starters, the lower down payments can mean more paperwork and will translate into higher monthly payments since borrowers are financing more, warned real estate broker Brendon DeSimone.
Plus, you'll need to pay mortgage insurance on the loan in addition to your principal and interest, which raises monthly payments even more.
But those extra payments are lower than they once were. At the start of 2015, the government reduced mortgage insurance premiums on some FHA loans, which increased the pool of borrowers.
"The fee change made more people see the FHA option as a financial alternative," said according to Jonathan Smoke, chief economist for
2. Look to see what Uncle Sam offers.
The Department of Veteran's Affairs guarantees home loans with 0% down for current and former service members.
The loans come with competitive interest rates and no private mortgage insurance premium, but borrowers could pay some fees at closing.
The Department of Agriculture has a home loan program to increase homeownership in more rural and less-populated areas. USDA loans do not require putting any money down, but there are eligibility requirements, including income and property size.
Many cities and municipalities offer down payment assistance programs to help potential buyers, according to Smoke. "Some of the programs are based on profession, where you are living, income qualification ratios ... they want to encourage people to buy."
3. Ask family members for a loan.
Tapping a relative for a large sum of money can be awkward, but setting up a loan is sometimes an enticing offer for both parties.
With many retirees earning very little interest on their money, a personal mortgage can offer a steady stream of income.
"If a parent has the money in an interest-bearing account earning darn near zero, this might be an option to increase their yield and help their child out at the same time," said Eric Hutchinson, certified financial planner at United Capital Financial Advisers.
Experts advise laying out the loan terms, including a payback schedule and interest rate, in writing. To make a loan legitimate to the IRS, the interest rate needs to be comparable to what banks charge.
"Consider your child a junk bond ... take a 10-year Treasury note yield and add two to three percent," advised Timothy Watters, certified financial planner at Watters Financial Services.
Buyers will have to disclose all loans to their mortgage lender.
4. Get the money gifted
Some well-off parents would rather see their inheritance money in action while they're still alive, said Hutchinson.
The gift tax is currently $14,000 per person, which means a parent can give a married couple up to $28,000, without triggering taxes.
Borrowers that go this route will have to provide their mortgage issuer with a letter from the giver that states the money doesn't have to be repaid, and may need to show their financial statements as well.
5. Dip into retirement funds ... cautiously
Another place to look for the money: try tapping your retirement account, if you have one. But use caution to avoid paying penalties.
Some 401(k) plans allow participants to take out 50% of their vested balance (up to $50,000) as a tax-free loan, according to Hutchinson. The loan needs to be repaid on a given timeline -- usually five years. But there's a big caveat: If you leave the company before the loan is paid back, you will likely owe the entire balance within 60 days. If you can't pay, the amount will be treated as an early withdrawal and you'll owe regular income taxes, plus a penalty.
Qualified first-time home buyers can also tap a traditional IRA account up to $10,000 without facing the 10% penalty. You will pay taxes on the amount withdrawn. If you have a Roth IRA and it's been open for at least five years, the distribution (up to $10,000) is tax free. Roths also allow you to withdraw your contributions for any reason without incurring tax or a penalty.

Ken Keegan Real Estate Broker
(910) 523-0903 mobileEmail Click here for more information on Brunswick, County Real Estate St. James Plantation

Monday, November 9, 2015

Home Sellers Net Highest Profits in 8 Years

Rising home prices over the last few years are finally putting more money back into home sellers’ pockets. Home owners who sold during the third quarter saw an average price gain of $40,658 – or 17 percent – from the purchase price of their property – the highest average price increase for sellers since the third quarter of 2007, according to RealtyTrac’s Third Quarter 2015 U.S. Home Sales Report.
“An increasing number of home owners in 2015 have been cashing out the home equity they’ve gained during the housing recovery of the past three years,” says Daren Blomquist, vice president at RealtyTrac. “That may be a good decision because the data points to a plateauing market going forward. Home price appreciation is slowing, a trend that will continue if interest rates rise in the coming months as expected. Meanwhile the threat of rising interest rates combined with lowered premiums for buyers using FHA loans is spurring more demand.”
In its analysis of 171 counties nationwide, RealtyTrac found that the following counties saw sellers, on average, see some of the largest gains in the third quarter:
  • San Francisco County, Calif.: 58.7% gain
  • San Mateo County, Calif. (San Francisco metro area): 55.7%
  • Santa Clara County, Calif. (San Jose metro area): 47.7%
  • Alameda County, Calif.: 43.1%
  • New York County, N.Y.: 41.6%
RealtyTrac’s report also showed the following counties posted the largest year-over-year increases in home prices:
  • San Mateo County, Calif.: up 17.6%
  • New York County, N.Y.: up 16.1%
  • Santa Clara County, Calif.: up 15.7%
  • Weld County, Colo. (Greeley metro area): up 14.6%
  • San Francisco County, Calif.: up 13.3%

Ken Keegan Real Estate Broker
(910) 523-0903 mobileEmail Click here for more information on Brunswick, County Real Estate St. James Plantation