How Much down Payment Do You Need to Purchase a Home?

How much money do you really need for a down payment on a home? I’ll go over a few different options today.

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If you want to buy a home, how much money do you need for your down payment?

Most lenders would love to see you put the standard 20% down for a conventional loan. Why? First of all, you won’t have to pay mortgage insurance. Secondly, you will be less of a risk. You are more likely to make your mortgage payments because you have equity in your home. Finally, putting 20% down helps you qualify for a bigger purchase.

That said, there are a few things to consider.

Recently, the National Association of Realtors revealed statistics from April to June of 2017 that found that 73% of all first-time homebuyers put less than 20% down; 61% of those buyers put less than 6% down.

Here in Southern California, which includes Orange County, L.A., and the Coachella Valley, prices are appreciating and interest rates are low overall. The market is really taking off, although the desert is slowing down a little bit. Home prices have appreciated quite a bit over the past eight and a half years since the bottom of the market.

Buyers are tired of renting. They know that long-term investments mean long-term gains. Real estate is a great way to build your portfolio and start building your wealth. In fact, 95% of all people who become millionaires got there through homeownership.

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There are a few benefits to putting 20% down on a conventional home loan.

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A lot of people may say that renting is the way to go. Renting is fine if you are moving around a lot or have a transient job that requires you to go from location to location. If you have established a family or have a great career in the area, then why are you renting? Why are you spending $2,000 to $4,000 and not gaining anything from it?

You may have a great place to live, but the reality is you are not benefiting from any of the mortgage interest deductions or appreciation that homeowners do. If the landlord decides to sell your home because the market is improving, then you have to move again, which costs you time and money.

So, what are the loan limits? 

FHA loans allow you to put 3.5% down. If you are looking to buy a $500,000 home in Orange County, you would need $17,500 down. If you were looking at the same home but needed to put 20% down for a conventional loan, you would need $100,000 for your down payment.

You can also get a conventional loan with a 5%, 10%, or 15% down payment. If you qualify for a VA loan, you can purchase a home with no money down.

If you would like to talk more in depth about which options are available to you, give us a call or send us an email. You can also get pre-approved by our preferred lender on our website.

So, if you have any questions, give us a call or send us an email. We would be happy to help you!

How Does Today's Market Compare to This Time Last Year?

It’s time for this year’s third quarter market update. How have things changed from this time last year, and what do these changes mean for you?

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Now that it’s time for this year’s third quarter market update, where do we stand in 2017 compared to where we were this time last year?

Let’s start by looking at the active listings in the Orange County market. Last year we had about 9,600 active listings. But, this year, that number is down to 7,500. As you can see, this is a pretty big drop.

The number of days on market has dropped, as well. Last year the average was 64 days versus this year’s 35.

We’ve also seen a shift in how many new listings are hitting the market on a monthly basis. At this time last year in Orange County, we had roughly 3,700 active listings. But now, we’re seeing 150 more new listings per month than last year—about 3,850 in total per month.

Next, we’ll look at sales—which is a very important factor in the market. Compared to last year’s 3,100 active listings, we’re now seeing just a little bit over 3,300 active listings. Rounding up, there have been about 250 more homes sold than there were last year.

Inventory has changed, too. Last year, we were seeing roughly three months of standing inventory. Now, though, we’re floating at about two months.

Let’s compare these changes to what we’ve seen in Coachella Valley.

There, we had about 5,500 active listings this time last year; however, this year we have about 5,200—accounting for a drop of about 300 active listings between 2016 and 2017.

In terms of days on market, last year we saw an average of about 114 versus this year’s average of 92 days on market.

Sales have undergone a big change in this area. Last year, we saw about 800 homes sold compared to the 1,100 that have sold this year. Also, standing inventory has gone down from seven months to about five.

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Right now, both sides are ultimately seeing benefits.

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But what do all these statistics mean? How will they impact you as a buyer or seller?

As buyers, we know that the market is cyclical. Interest rates, which were supposed to bump, are still low right now. It’s inevitable that this bump will happen eventually, though.

Now is the time to buy. Take advantage of the market, as well as the mortgage deductions on your taxes, and become a homeowner.

It’s a different story for sellers. While it is a somewhat difficult market for sellers right now, there are some positives. There has been a huge improvement in value since the bottom of the market eight or nine years ago. In Orange County, we are seeing record appreciation. 

So, if you are thinking of cashing out—this could be a good time.

Right now, both sides are ultimately seeing benefits. If I can help you with any of your real estate needs, you have any other questions, or you would like more information, feel free to give me a call or send me an email. I look forward to hearing from you.

How to Hire the Right Agent

How can you be sure you’ve hired the right real estate agent? I’ll go over some ways to put your mind at ease today.

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Not all real estate agents are created equal, and there are a few things you should ask when choosing one.

First, are they a seasoned professional? Is this their full-time job or do they do this part time? Have they been in the business long enough to experience the ups and downs of the real estate market? Do they know a hot market from a slow market? Do they know what’s going on with foreclosures? Have they experienced all types of transitions? Have they represented buyers and sellers? The average real estate agent only sells one to four homes per year, so you need to make sure they know how to negotiate for you.

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If you get the home you want or the price you want, that’s what really matters, not the personal interests of the agent.

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Second, do they have a great marketing plan? What is your agent going to do specifically to sell your home or find you a great deal? Are they putting their marketing budget toward new and exciting ways to get your property seen? Are they on the right websites? Are they using great photography? What are they doing to market your home to the public to get as much exposure as possible?

Finally, will they negotiate in your best interests? Most real estate agents who don’t do a lot of business are focused on themselves and what is going to benefit them the most. It’s not about us though. If you get the home you want or the price you want, that’s what really matters. There are several stages of negotiation, so they need to be able to get you to the end with your needs in mind instead of shoving a contract down your throat to get their commission more quickly.

If you have any questions about this topic, or if you have any other real estate needs, please feel free to give us a call or send us an email. We’re always happy to help!