Numbers Count: How liquid is your down payment?

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Numbers count. They matter to bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.

Young man at kitchen table with coffee, looking at financial documents.The numbers: Consumers were less confident about the economy in February compared to January as financial market volatility and global economic conditions appear to have weighed on the outlook, according to the Conference Board’s Consumer Confidence Index, released Feb. 23.

“Consumers’ assessment of current conditions weakened, primarily due to a less favorable assessment of business conditions. Continued turmoil in the financial markets may be rattling consumers, but their assessment of current conditions suggests the economy will continue to expand at a moderate pace in the near-term,” said Lynn Franco, Director of Economic Indicators at The Conference Board.

The confidence index is consistent with the University of Michigan’s February sentiment index, which slid to a four-month low, reflecting the impact of recent turmoil in equity markets, Bloomberg reported.

What counts: Market volatility may take a toll on consumer confidence, but don’t let it take a toll on your down payment. The market fluctuations in recent months may serve as a warning for potential homebuyers: If you have saved up for a down payment, now’s the time to consider where to park that down payment. Whether it is 3% of your potential purchase price or 20% or more, ask yourself, “How quickly can I get the cash?”

If quick access to your down payment is a concern, one option is to keep the money in a highly liquid account, such as a checking account or money market account. This is particularly important in a competitive housing market, where buyers may need to move quickly to present an offer and move quickly to close a transaction. Holding your down payment in an account that may be difficult to turn into cash or that may fluctuate in value may complicate your closing.

Keep in mind, when you make an offer on a home you’ll likely need to include a check as a good-faith deposit to assure the seller you are committed to purchasing the home. Once an offer is accepted and you begin the mortgage approval process, you’ll need to provide current financial account statements as evidence you have the down payment and funds for other potential closing costs.

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