How to Save for a House

Saving for a house means taking control of your finances.

The idea of buying your dream home might seem more like a wishful fantasy if you have no clue how you will stash away enough money to make it a reality. If you are worried about saving up enough to buy a home, you aren’t alone. Coming up with the money for a down payment is one of the most intimidating—and scary—factors for people who hope to become homeowners. The good news: there are some great strategies to help you save for a house.

Simple Ways to Save Up Money for a House

Track your spending and expenses.
This is the something you should be doing anyway. Use an app or online tool that tracks your spending and keeps a running total of the amounts you spend on specific items or categories. Tip: it’s easier to track spending if you use plastic for everything. Most people find this process quite eye-opening, as it’s easy to lose track of a how much you spend on frivolous purchases or small items throughout the week. But spending even a few dollars at a time on luxuries or convenience items can really add up.  Finding out where your money goes is the first step in figuring out how to keep more of it in the bank.

Make a budget—and stick to it.
Once you evaluate your spending, you will likely spot places where you can cut back or eliminate extras. This may be challenging—sticking to a strict budget often isn’t a lot of fun. But just keep focusing on your end goal. Some belt-tightening now is a minor sacrifice that will quickly be forgotten when you are getting the keys to your new home. If you suspect you will feel really deprived or get discouraged, work a few small yet rewarding “splurges” into your budget to keep your spirits up—but see if you can cancel out the costs of these small treats by saving an equivalent amount elsewhere in your budget.

Be a deal hunter and savvy consumer.
You’re tracking everyday spending, but don’t overlook those recurring monthly expenses, too. Put those monthly bills under a microscope. There’s a good chance you are paying for services and features you don’t really need. Call your service providers, credit card companies and other businesses you pay every month and see if they can lower your rate or offer you a better deal.

Keep your down payment fund on lockdown.
When you are saving up to buy a home, that savings account should be considered untouchable. Barring a major emergency, don’t even toy with the idea of spending any of that money until you are ready to purchase a home. It’s easier to keep an off-limits down payment fund if you set up a separate account dedicated solely to this purpose. Think of this account as being a one-way street: funds should go in, but never come out—at least, not until you are ready to write out that down payment check.

Look for ways to boost your income.
Your budget consists of two parts: money coming in, and money going out. You’ll get the best results if you make improvements on both sides. See if there are opportunities to work extra hours. You may even want to consider a part-time job. Think about skills or talents that you could parlay into freelance income.

Exactly how much will it take to buy the home of your dreams? Give me a call 586.907.1206

First-Time Home Buyers Learn to Move Quickly in Tight Markets

Rising home prices and a slim supply of starter homes in many areas are making this spring a challenging one for first-time buyers, real estate professionals say.

The typical price of a previously owned home in March was about $250,000, up nearly 6 percent from a year earlier, according to the National Association of Realtors. The median price was higher in certain parts of the country, particularly in the Northeast and the West.

And, homes sell quickly when they come on the market — especially smaller, lower-priced homes. Seasonal demand is increasing as usual, but buyers are finding that there is a lack of new listings. Homes are going under contract in about a month, the association reported, about four days faster than last year.

“The starter house is nearly missing in some markets,” said Jessica Lautz, the association’s managing director of survey research and communication.Much new construction is aimed at more affluent buyers. And, investors — both professional and amateur — are turning to single-family homes as rental properties to diversify their holdings, creating more competition for traditional buyers when houses come on the market, said Danny Gardner, senior vice president of affordable lending and access to credit at Freddie Mac. Freddie is one of two (along with Fannie Mae) big government-controlled mortgage finance companies.

Competition for all homes in general was particularly cutthroat in some areas, especially in Western markets like San Francisco and other California cities, along with parts of Texas and Colorado, according to Realtor.com, a listing website. The website also cites Boston as a “hot” market.In Colorado Springs, Jay Gupta, a real estate agent, described an “unprecedented” imbalance between the supply of homes and the demand for them. Prices in Colorado Springs are rising, in part because buyers priced out of already costly areas like Denver and Boulder are seeking places that are relatively affordable, brokers say.

In April, Mr. Gupta said, the Colorado Springs market had 1,524 active listings, and ended the month with 1,286 sales. Properties selling for less than $225,000 are in extremely short supply, he said: “Those homes just aren’t there.”Recently, Mr. Gupta said, a home was listed for $310,000. Forty people attended a three-hour open house, and the property went under contract to a buyer offering $30,000 over the asking price. The buyer, who was relocating from out of state, apparently grew tired of seeing his offers on other houses get declined, Mr. Gupta said.

In addition to daunting bidding wars in some markets, first-time buyers often have trouble coming up with a down payment.

Based on the median home price, a down payment of 20 percent — a longtime rule of thumb — would be more than $50,000. Amassing that much cash can be difficult. The average savings of people who do not own homes was $5,200 in 2016, according to the Realtors association, citing Federal Reserve data.

In reality, however, many home buyers make much smaller down payments. More than half of first-time buyers made down payments of 6 percent or less in the 12 months ending in November 2017, according to survey datThe notion that a 20 percent down payment is required is increasingly a “myth,” said Mr. Gardner of Freddie Mac.

Both Freddie and Fannie, as they are known, support home loans to eligible buyers who put down as little as 3 percent. (The companies do not directly make home loans, but buy mortgages meeting their standards and package them as securities).

Freddie Mac said it would soon expand its low down payment program to broaden the pool of buyers who can qualify. The updated program, to become available this summer, will serve first-time borrowers regardless of income.

Fannie Mae was already offering its low down payment program to a broad pool of borrowers, said Jonathan Lawless, vice president of product development and affordable house are some questions and answers about home buying in a seller’s market:

Should I put 20 percent down on a home, if I can afford it?

Making a 20 percent down payment is still a sound strategy, if you can swing it. You will usually qualify for a lower interest rate on your mortgage, and you will avoid paying for private mortgage insurance, which adds to the cost of your monthly payment.

And, in hot markets where sellers can choose from several bids, a larger down payment makes you a more attractive buyer, said Kelly Moye, a broker with ReMax and a spokeswoman for the Colorado Association of Realtors. In bidding wars, she said, “the ones with the biggest down payments usually win,” because they are seen as safer buyers more likely to close the deal.

Some states and nonprofit organizations offer help with down payments. You can search online for programs to see if you’re eligible.

How can I increase my chances of getting the home I want?

Shoppers should get preapproved for a loan and know what they are looking for in a home, so they are prepared to act quickly if they find one they like, Mr. Gupta said. In hot markets, you do not have time to ponder your options. Make a list of two or three “must haves,” he said — whether it’s a big yard or a nice view — and make those the priority so you can move fast when the opportunity arises. “You have to be more flexible,” he said.

What are current mortgage rates?

The average rate on a 30-year, fixed-rate mortgage was4.55 percent as of Thursday, unchanged from a week earlier, according to Freddie Mac’s rate survey.

Consolidate debt using your home

If you have multiple forms of debt, you may have high interest rates and be paying more than necessary. With a debt consolidation loan, you may be able to eliminate high interest debt by making one low payment a month. Your home equity can be a great way to consolidate debt.

Taking control of your credit cards, auto loans and other debts is a great feeling. Use your home equity for debt consolidation to enjoy low fixed interest and just one simple payment every month. You may want to consolidate debt in order to:

Pay less each month

Lower your monthly payment and get a lower interest rate.

Make one simple payment

Combine high-interest debts into one fixed payment each month.

Have peace of mind

See how great it feels to simplify your life and get on the path to a brighter future by managing your debts.

3 Reasons Millennial Buyers Love VA Loans

Millennial veterans and military members are helping fuel the resurgence of the historic VA loan program. Last year’s 700,000-plus loans were more than double the agency’s total from five years ago.

Younger buyers in particular have flocked to these government-backed mortgages during a time of tight credit and flatlining wage growth. The VA says millennials accounted for about a third of all VA loans last year.

These low-interest loans offer qualified buyers a wealth of benefits. That’s especially true for millennial borrowers, who often have dented credit or minimal savings. This $0 down payment loan program was created to help level the playing field for those who serve our country, and it’s still doing so today.

“VA loans offer an extraordinary opportunity for veterans because of lower interest rates, lower monthly payments, no or low down payments, and no private mortgage insurance,” said Jeff London, director of the VA home loan program.

Here’s a closer look at three of the big benefits that make VA loans such a good match for millennial home buyers.

1. No down payment requirement

This renowned benefit of VA loans helps veterans purchase without having to spend years saving for a down payment. When determining affordability, qualified buyers in most of the country should know that they can purchase a home for up to $424,100 before having to factor in a down payment. That ceiling is even higher in costlier housing markets.

The average VA loan last year was for about $253,000. Getting a conventional loan for that amount often requires a down payment of at least $12,000. FHA loans require at least 3.5% down. That’s no small sum in either case, particularly for younger veterans and military families.

2. No mortgage insurance

VA buyers also don’t have to pay extra each month for mortgage insurance, a common feature of low-down-payment loans. Conventional buyers typically need to pay for private mortgage insurance unless they can put down 20%. FHA loans come with both upfront and annual mortgage insurance premiums.

For example, FHA buyers shell out an additional $140 per month for mortgage insurance on a typical $200,000 loan. That extra outlay can limit your purchasing power, as well as put a hole in your monthly budget.

Most VA buyers encounter a funding fee that goes straight to the Department of Veterans Affairs. Veterans and military members can finance this cost over the life of their loan. Borrowers who receive compensation for a service-connected disability don’t pay it at all.

3. Flexible credit guidelines

VA loans were created to boost access to homeownership for veteran and military families. They’re naturally more flexible and forgiving when it comes to credit underwriting.

Lenders typically have lower credit score benchmarks for VA loans than for conventional mortgages. The average FICO score on a VA purchase last year was 50 points lower than the average conventional score, according to Ellie Mae.

Compared with conventional borrowers, qualified VA buyers can also bounce back faster after a bankruptcy, foreclosure, or short sale.

Despite their flexibility, VA loans have had the lowest foreclosure rate on the market for most of the past nine years. That’s due in large part to the VA’s commitment to helping veterans keep their homes.

Loan program officials can advocate on behalf of veteran homeowners and encourage lenders and mortgage servicers to offer alternatives to foreclosure.

“VA is even there to assist veterans who encounter difficulty making payments,” London said. “Last year, VA and servicers helped over 97,000 veterans avoid foreclosure. Using the VA program is a win for veterans, lenders, and taxpayers.”

More than seven decades after their introduction, VA loans are still making a big difference for veterans, military members, and their families.

“A home and its equity becomes the bedrock of their economic future,” said Curtis L. Coy, deputy undersecretary for economic opportunity at the Department of Veterans Affairs. “Money that would have typically been used for the down payment is now money in their pocket—money that can be the beginning of their savings or can be used to fix up their home.  It is a win-win for the veteran and the community where they spend that money.”

Top 10 Home Loan Tips

Buying a home can be a fun and exciting experience. But finding the right home is just one step in the process. Choosing the right home loan can be just as important. Here are some tips to help make finding the right home loan as easy as possible.

Tip #1 – Start saving for a down payment

Depending on your lender and the type of loan you choose, your required down payment can range from 3% to 20% of the purchase price of the home. Establishing a monthly budget will help you put away enough money for your down payment.

Once you’ve assessed what your budget will support, consider having money automatically deposited from your paycheck or bank account to a savings account to make it easier and more convenient to put aside money each month.

If you won’t be able to come up with a large down payment, then you should look into an FHA loan, which helps home buyers who can only make a small down payment.

Tip #2 – Check your credit score

Having a good credit score puts you in a position to attract the best deal on your home loan. So it’s a good idea to obtain a copy of your credit report before starting the home buying process. You will see what your credit profile looks like to potential lenders and can then take steps to improve your credit score if necessary.

You can receive one free copy of your credit report each year from each of the three major credit reporting agencies – Equifax, Experian, and TransUnion – by visiting www.annualcreditreport.com. If you pay a small fee to the reporting agency, the credit report you receive will also include your credit score.

Tip #3 – Get your financial documents in order

When you apply for a mortgage, you will need to provide your lender with a number of financial documents. Having these documents already assembled will help accelerate the processing of your loan application. At a minimum, you should be prepared to provide your last two pay stubs, your most recent W-2, your last two years of tax returns, and current bank and brokerage statements.

Tip #4 – Utilize a mortgage calculator

Mortgage calculators are great tools for helping you understand how much home you can afford. They are very easy to use and can show you how much your monthly mortgage payment would be under different home price, down payment and interest rate scenarios.

Tip #5 – Learn how to compare offers

All mortgages are not created equal. Even if loans have the same interest rate, there could be differences in the points and fees that make one offer more expensive than another. It’s important to understand all of the components that go into determining the price of your mortgage, so you can accurately compare the offers being made. One thing you should compare lender to lender are loan estimates. With the new regulations; the government has required lenders to make the mortgage quotes aka loan estimates more easily read by consumers.

Tip #6 – Start tracking interest rates

The interest rate will be one of the biggest factors in determining the cost of your mortgage. Interest rates for mortgages change almost every day and it is helpful to know which way they are heading.

Tip #7 – Get pre-approved not prequalified.

Yes there is a difference believe it or not. The difference of being pre approved and prequalified is one thing… your documents being reviewed by your loan officer for a pre approval. Many real estate agents want you to be pre-approved for a loan before they will start to work with you. The mortgage pre-approval process is fairly simple, usually just requiring some financial information such as your income and the amount of savings and investments you have. Once you are pre-approved, you will have a better sense of how much you can borrow and the price range of the homes you can afford.

Tip #8 – Understand the various loan options

Maybe your parents had a 30-year fixed-rate loan. Maybe your best friend has an adjustable-rate loan. That doesn’t mean that either of those loans are the right loan for you. Some people might like the predictability of a fixed-rate loan, while others might prefer the lower initial payments of an adjustable-rate loan. Every home buyer has their own unique financial situation and it’s important to understand which type of loan best suits your needs.

Tip #9 – Be prompt in responding to your lender

After you have applied for a home loan, it is important to respond promptly to any requests for additional information from your lender and to return your paperwork as quickly as possible. Waiting too long to respond could cause a delay in closing your loan, which could create a problem with the home you want to buy. Don’t put yourself in a position where you could end up losing your dream home, as well as any deposit you may have put down.

Tip # 10 – Don’t mess up your credit during the loan processing

It’s not uncommon for lenders to pull your credit report a second time to see if anything has changed before your loan closes. Be careful not to do anything that would bring down your credit score while your loan is being processed. So, pay all of your bills on time, don’t apply for any new credit cards, and don’t take out any new car loans until your home loan has closed.