All Posts Tagged: second mortgage
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.The numbers: Total existing-home sales increased 2% in July to a seasonally adjusted annual rate of 5.59 million — the highest pace since February 2007 (5.79 million), according to the latest data from the National Association of Realtors (NAR) released August 20. But the share of first-time buyers declined in July for the second consecutive month, falling to 28% from 30% in June. A year ago, first-time buyers represented 29% of all buyers. What counts: I agree with NAR’s Chief Economist Lawrence Yun, who said, “Rising rents and flat wage growth make it difficult for many to save for a cash down payment, and the dearth of supply in affordable price ranges is limiting their options.”
Fifty percent of renters in a Federal Reserve survey that I wrote about recently said coming up with a cash down payment is preventing them from buying a home. But how much cash constitutes a down payment?
The notion that it takes 20% cash down to buy a home is a common misconception since there are programs available in the general lending market that allow for lower cash down payment percentages. The NAR report noted the median price of an existing home in July was $234,000. It might be hard for a potential first-time buyer to imagine amassing more than $46,000 to make a 20% down payment on a median-priced home.
The good news is that many banks now offer 3% cash down mortgages through programs launched this year by Fannie Mae and Freddie Mac. Freddie Mac’s program Home Possible Advantage is a conforming, conventional mortgage with a 3% cash down-payment requirement designed to help first-time buyers and other qualified borrowers who have limited down-payment savings. Fannie Mae has a similar 3% cash down payment program.
There may be other ways for qualified borrowers to get help with a cash down payment, such as using a second mortgage to reach the 20% threshold to avoid paying mortgage insurance. A second mortgage means added debt and another monthly payment, so you’ll want to consider this option carefully.
You may also qualify for cash down-payment assistance programs. If you are considering purchasing a home, you should talk to your lender and real estate agent about potential programs that may help reduce the cost burden. One online resource to help explore some potential options is Downpaymentresource.com, which has a database of assistance programs.Read More ›