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Saving for a down payment often represents the biggest hurdle for first-time home buyers. In December, 25% of buyers on realtor.com® who were looking to purchase their first home said a key factor holding them back was lacking funds for a down payment. No matter how you cut it, it represents a big chunk of cash. But here’s the thing: It doesn’t always need to be quite so big as most think.
Many first-time buyers don’t realize that it doesn’t necessarily take 20% down to purchase a home.
Indeed, the average down payment in the U.S. on mortgages used to purchase a home was 11%, according to our analysis of loan records from Optimal Blue, an enterprise lending software company.
As with many stats, that 11% average hides lots of variation across loan types and locations. And for some buyers, it may even take more than 20% to buy a home.
Borrowers with jumbo mortgages had to put the highest percentage down, with an average of 23%. Conforming mortgages averaged 18% in 2016. On the other hand, government-backed FHA, VA, and USDA mortgages featured average down payments of 4.8%, 2.2%, and 0.4%, respectively. These government programs are meant to open up more pathways to homeownership for first-time buyers, veterans, and heads of households in rural areas.
The average purchase price of homes ...
Looking to buy a house? You might want to act sooner rather than later.
In a nearly unanimous vote, the U.S. Federal Reserve increased the Fed Funds Rate by a quarter of a percent Wednesday. It is the second rate hike since December. While the rate increase indicates a strong economy, it will mean higher interest rates for mortgages and other consumer and business loans across the country. The Fed doesn't directly set mortgage rates, but its actions can affect long-term interest rates and the housing market.
The good news is, even with the increase, rates are still relatively low and many experts doubt they will reach 5% this year but these numbers could change.
At current interest rates, buyers will pay approximately $120 more per month compared to a year ago, assuming a $430,000 price tag and a 20% down payment.
Borrowers who are on the fence are urged to lock an interest rate before any further increases occur. Zillow economists predict home prices will most likely increase in 2017. These factors are all indications that prospective homebuyers should not delay.
The Fed has now raised rates three times since the end of 2015.
Len Kiefer, deputy chief economist at Freddie Mac,expects rates to stay around 4.25% to 4.50% this immediate buying season.
Don't be afraid of the housing market. The key step for any prospective homebuyer is to get aligned with a team of experts to help guide you. Choose a ...
What do most people do when they can't afford that hot, new item they just can't live without? Charge it. Credit cards have made instant gratification a way of life, but getting what you want whenever you want is not always a smart move for your finances. Credit card debt can add up quickly, and too much debt can actually be a hindrance to achieving your long-term goals, like buying a home, getting a new job, starting a business, or saving for retirement. According to NerdWallet's 2016 American Household Credit Card Debt Study, the average U.S. household carries about $16,061 in credit card debt and pays around $1,292 in credit card interest each year.
If you're trying to dig your way out of credit card debt, rest assured, there are ways to pay it down. Before you start, make sure you've saved up enough for an emergency fund so you no longer have to make purchases on credit. Once you've got enough of a cushion to fall back on, use the following strategies to start paying down your debt:
1. Pay off the highest interest rate first.
Paying off the card with the highest interest rate first allows you to reduce the amount you spend on interest, which saves you the most money in the long run. To do this, continue making minimum payments on your other credit cards, and put more than the minimum amount toward your highest interest card.
2. Pay off the lowest balance.
Also known as the snowball method, this is the opposite ...
Housing is set to smash records in February, with realtor.com® forecasting both the fewest days on market since the recession and the month's highest list prices—an early start to the spring home-buying season, says realtor.com Chief Economist Jonathan Smoke.
"The spring buying season is off to a booming start," Smoke says. "Not only is the season starting a month early, February is also expected to see the fastest-moving inventory in a decade, as well as the highest home prices the month has ever seen. Homebuyers, take note: This year is shaping up to be even more of a seller's market than last year."
Mortgage rates showed minimal movement this week, marking the fourth week in a row of negligible change, according to Freddie Mac's recently released Primary Mortgage Market Survey® (PMMS®). The 30-year fixed-rate mortgage averaged 4.16 percent with an 0.5 point, a one point increase from 4.15 percent the previous week.
You’ve taken all the necessary steps to get ready to buy a home. You’ve saved for a down payment, improved your credit score, got all your financial documentation in line, and figured out what price range you can afford. And then the interest rates had a slight increase, so stopped everything!
Don’t run off so soon. The facts are event with increases in interest rates from last year’s historic lows, the rates are still favorable for buying. According to realtor.com®’s January survey of active homebuyers, 44 percent of buyers planning to buy in spring 2017 are first-time buyers. With inventory shortages and rising home prices, the urgency to buy now has never been greater. So before you shelve your plans for buying a home this spring, know the facts about rising rates and home prices.
So what are you waiting for, another increase?
Take a cue from repeat homebuyers who are actually being spurred into action by rising rates. Even with the current increases, interest rates remain historically low, and the movement in rates hasn’t yet tipped overall buyer demand down. Experienced buyers, in fact, are trying to close before rates increase further, as evidenced by increased realtor.com® listing views and decreased inventory. In the short term, the rate movement seems to have encouraged, rather than dampened, overall demand.
While concerns about ...