We have recently reported on the misconception that many buyers have regarding the down payment necessary to purchase a home. Multiple studies reveal that 40-50% of Americans believe you need between 15-20% of a down payment to be eligible to purchase a home.
This misconception came about as the government just last year debated new guidelines for residential mortgages because of the housing collapse in 2007. Some were arguing that there should be a minimum of 20% or even 30% down payment on all mortgage loans. However, those standards were never implemented.
To counter this misunderstanding, Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management, in a recent Executive Perspectives explained that a person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent”.
3% Down Payments Available Soon?
Just last week, Federal Housing Finance Agency Director Mel Watt announced that mortgages requiring only a three percent down payment may soon be available:
“To increase access for creditworthy but lower-wealth borrowers, FHFA is also working with the Enterprises to develop sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent. Through these revised guidelines, we believe that the Enterprises will be able to responsibly serve a targeted segment of creditworthy borrowers with lower-down payment mortgages by taking into account “compensating factors.”
If you are saving for either your first home or that perfect move-up dream house, make sure you know all your options. You may be pleasantly surprised.
The Gallup organization conducts an annual report entitled the Economy and Personal Finances Poll, which asks Americans to choose the best option for long-term investment.
It was no surprise that real estate returned to the top position over other investment categories (gold, stocks/mutual funds, savings accounts/CDs and bonds).
Back in 2011, gold was the most popular long-term investment among Americans. However, with the housing market improving across the U.S. and home prices rising, more Americans now consider real estate the best option for long-term investments.
The poll also revealed that real estate was considered to be the best long-term investment by all four subgroups by age and two out of three by income:
There are some homeowners that have been waiting for months to get a price they hoped for when they originally listed their house for sale. The only thing they might want to consider is… If it hasn’t sold yet this fall, maybe it’s not priced properly.
After all 14,164 houses sold yesterday, 14,164 will sell today and 14,164 will sell tomorrow. 14,164!
That is the average number of homes that sell each and every day in this country according to the National Association of Realtors’ (NAR) latest Existing Home Sales Report. NAR reported that sales are at an annual rate of 5.17 million. Divide that number by 365 (days in a year) and we can see that, on average, over 14,100 homes sell every day. Sales are at the highest pace of 2014.
We realize that you want to get the fair market value for your home. However, if it hasn’t sold in today’s active real estate market, perhaps you should reconsider your current asking price.
If you are thinking about purchasing a home right now, you are surely getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home.
There are three questions you should ask before purchasing in today’s market:
1. Why am I buying a home in the first place?
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:
- A good place to raise children and for them to get a good education
- A place where you and your family feel safe
- More space for you and your family
- Control of the space
What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.
2. Where are home values headed?
When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.
Here is what the experts projected in the latest survey:
- Home values will appreciate by 4% in 2015.
- The cumulative appreciation will be 19.5% by 2018.
- Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 11.2% by 2018.
3. Where are mortgage interest rates headed?
A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates.
The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months.
Only you and your family can know for certain the right time to purchase a home. Answering these questions will help you make that decision.
The National Association of Realtors (NAR) released their Existing Home Sales Report earlier this week. The report revealed that “sales bounced back in September to their highest annual pace of the year”. As the chart below shows, after a very slow start at the beginning of the year, residential home sales have been increasing nicely.
Billionaire money manager John Paulson was interviewed at the Delivering Alpha Conference presented by CNBC and Institutional Investor. During his session he boldly stated:
“I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you’re the owner-occupier of.”
Who is John Paulson?
Paulson is the person who, back in 2005 & 2006, made a fortune betting that the subprime mortgage mess would cause the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?
According to Forbes, John Paulson is:
“A multibillionaire hedge fund operator and the investment genius.”
According to the Wall Street Journal, Paulson is:
“A hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.”
Why does he believe homeownership is such a great investment?
Paulson breaks down the math of homeownership as an investment:
“Today financing costs are extraordinarily low. You can get a 30-year mortgage somewhere around 4.5 percent. And if you put down, let’s say, 10 percent and the house is up 5 percent, which is the latest data, then you would be up 50 percent on your investment.”
How many are seeing a 50% return on a cash investment right now?
Paulson goes on to compare the long term financial benefits of owning verses renting:
“And you’ve locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed.”
Whenever a billionaire gives investment advice, people usually clamor to hear it. This billionaire gave simple advice – if you don’t yet live in your own home, go buy one.