Do you want to buy a house but think it is out of your reach financially? Well, you’re not alone. A major mortgage company recently did a survey that revealed that the number one reason that people don’t pursue their dreams of home ownership is because they think that they have to have 20% down. I was absolutely shocked when I heard that! What if I told you that you could quite literally buy a home for less out of pocket than you’ll spend furnishing it? Well buckle your seat belts, kids because it’s true and I’m about to tell you all about how to do it.
Use the right loan – Yeah, you’re parents or grandparents probably purchased their home with a 20% down Conventional loan. But, just like everything else lending has changed to meet the need of its current consumers. With options including 10% and 5% down conventional loans, a 3.5% down FHA loan, in-house portfolio loans at 3% down, all the way to no money down on USDA and VA loans the options are endless! The requirements will vary between loan types. Your lender and Realtor will help you figure out which is best suited to your financial needs and goals.
Cut out closing costs – So we’ve learned that we can buy a house with little to no down payment, but what about closing costs? Closing costs are what the lender charges to procure your loan. Each loan type is going to have different charges, but generally closing cost run between 2% and 3% of the purchase price. How can we lessen the blow of those costs? Ask the seller to pay, of course! It’s very common to request that the seller pay some or all of your closing costs. How much you request generally depends on your needs. But don’t worry; your lender will be able to tell you how much you’ll need to ask for!
Grant Money – Every year grants are rolled out by different lending institutions. Normally the funds allotted for the grants are limited which means there’s only so many individual grants they have available to give. While others are just programs lenders run until they stop. But for the most part, you’ll have to get ‘em while the gettins’ good! They’re not always available, though, so talk to your realtor and lender about what’s available and how it can help you!
Upfront costs – You do need some money to buy a house, even if you use a no money down loan and get your closing costs covered by a grant or seller! There are costs like home inspections, earnest money, and appraisals. A typical whole home inspection is around $300 to $500, earnest money is a negotiable amount that is an upfront deposit that gets applied to purchase at closing (average in this area starts around $500), and sometimes a lender will have you pay for the appraisal upfront which is around $400 to $500.
So let’s put all of this information together into some actual numbers. I’ll use an example from a recent sale that closed. My buyer got a home under contract for $102,000. They used a 3.5% down FHA mortgage. They asked for $3,000 in seller paid closing costs and they qualified for a $2,000 grant from their lender. They ended up bringing just over $2,100 to closing. Their upfront costs were about $300 for a home inspection and $500 in earnest money. So total out of pocket was right around $2,900. To buy a house! So the question isn’t how much does it cost to buy a house, it’s how much do you want to spend!
Contact us today at 937.378.3800 so that we can talk about your goals and help make the dream of home ownership become a reality for you!
How to be a Successful Buyer in a Seller’s Market
Years ago when I started my Real Estate Career we were still in the thick of a depressed market. Bank owned listings were prevalent and real estate investors were having a hay day! With foreclosures flooding the market buyers had a lot of options to choose from and sellers had to drop prices to compete. Buyers were happy! But things have shifted and buying a house now is a different experience all together.
Market forecasters say that we could see foreclosures only making up 1 to 3% of home sales this year. That means the housing market is essentially “back to normal”. Little to no foreclosures on the market means that there’s less to choose from and that the consumer home seller holds the monopoly. It’s a seller’s Market Ya’ll. So what can you do as a buyer to ensure a good home buying experience?
Set your expectations: Basic rules of supply and demand say that when supply is low, prices are up. What you WANT to pay for a home doesn’t determine its market value. If you are home shopping under the impression that you can effectively place a low ball offer, you’re going to get nowhere fast. Chances are if you find a home you like, there’s someone else who likes it too. Expect to be competing with other buyers. If you’re unsure if the asking price is fair ask your agent to show you what comparable properties are selling for.
Be prepared: Since you’re likely to be competing with other buyers you want to make sure you’re ready to pull the trigger when you do find a home you like. You’ll need to have your pre approval ready when you start looking. You and your agent will need this to determine which type of financing you’ll be using, your price range, and the amount of closing cost you should be asking for from the seller. If you find a home you love and then have to get your financing together someone who was ready could already have your house pending.
Work with the right agent for you: Because the market is competitive for buyers right now, it’s more important than ever to have the right agent on your side. Not only do you want your agent to be knowledgeable but you also want to make sure that your schedule and communication preferences fit well together. What I mean by this is if you work until 6 during the week, you want an agent who has availability to work evenings. If you find a house on Monday you love but can’t see it until Saturday afternoon, it might be gone. Also, if you are an avid text message user who despises phone conversations you may want to rethink the Realtor who has a flip phone and wants to fax you documents. Everyone has their own methods that work best for them. While none of them are wrong, working with an agent who works the way you do can add a level of fluidity to your transaction.
The Perfect (Sales) Storm
The weather here in the tristate area has been anything but normal recently. We’ve went from a mild winter, to spring like warmth and tornados, to actual winter like temps and snow - all within about a week’s time! Although, the weather here in Cincinnati has always been quite finicky. How’s the saying go? “If you don’t like the weather just stick around, it will change.” Well, so goes the real estate market.
There’s a storm brewing in the market. A few conditions are coming together to make it a perfect storm for sellers. Here’s what the forecast models are showing:
High demand, low supply – In the Cincinnati MLS we generally run an average of 10,000 units for sale. Give or take. When the market was flooded we had over 20,000 units which was more supply than the market needed therefore demand dropped and it was overwhelmingly a buyer’s market. But right now we are at around 5,000 units for sale in the Cincinnati MLS. That’s half the normal supply! This creates a higher demand and means buyers are competing, not sellers.
Rising Values – What does high demand do? It makes values go up! Here’s an excerpt from the Cincinnati Area Board of Realtors Press Release. These values reflect January 2017 sales information, “The average home price climbed to $180,681 compared to $166,130 a year earlier, a +8.76 % increase. At the same time, the inventory of homes for sale, as of January 31, continued its year-over-year declining trend to 4,867 from 6,647 a year ago, down – 26.78 %.’ I’m not making this stuff up!!!
Low Interest Rates – Interest rates are still hovering the in the low 4’s. This is up just slightly from last year but is still extremely low! Great, right? But how does it affect you as a seller? Glad you asked! Low rates mean that a buyer has more buying power. Here’s an example; let’s say that a buyer wants to keep their monthly payments right around a grand. If the interest rate is 4.5% they could purchase a home at $200,000 and have a monthly mortgage and interest payment of $1,013.37. Let’s change that by just 1%. At 5.5% a buyer would have to purchase a home for $180,000 to have a monthly payment of $1,022.02. A 1% increase in interest decreased the buying power by $20,000!!
All of these conditions coming together at the same time are really creating a perfect storm in the market. We’re gearing up for another strong year. But we need more listings to support the buyers out there looking! If you’ve considered selling but weren’t sure if it was the right time, now could be the perfect time for you. Contact an agent at Ring Real Estate today to find out!
Curious about local real estate? So are we! Every month we review trends in our real estate market and consider the number of homes on the market in each price tier, the amount of time particular homes have been listed for sale, specific neighborhood trends, the median price and square footage of each home sold and so much more. We’d love to invite you to do the same!
You can sign up here to receive your own market report, delivered as often as you like! It contains current information on pending, active and just sold properties so you can see actual homes in your neighborhood. You can review your area on a larger scale, as well, by refining your search to include properties across the city or county. As you notice price and size trends, please contact us for clarification or to have any questions answered.
We can definitely fill you in on details that are not listed on the report and help you determine the best home for you. If you are wondering if now is the time to sell, please try out our INSTANT home value tool. You’ll get an estimate on the value of your property in today’s market. Either way, we hope to hear from you soon as you get to know our neighborhoods and local real estate market better.