Date Archives: August 2022

How big should your down payment be?

When home prices rise, so do the down payments required to purchase those homes. This has long posed a roadblock for many would-be first-time homebuyers. But it doesn't have to be the case.

Our real estate agents share everything you need to know about making a down payment on a home.

Down Payments: How They Work, How Much to Pay

A down payment is simply the part of the home's purchase price you pay upfront. It might be the biggest check you ever write in your life, and the amount you pay could impact your finances for years, if not decades.

Contrary to conventional wisdom, you don't have to put 20 percent down on a house. There's no law or rule for a universal minimum down payment. The amount you should put down is a personal decision that depends on what's best for your finances. Lenders require homebuyers to make a down payment for most mortgages. For instance, the amount is usually 3% of the home's price for conventional mortgages.

On that note, most lenders will require a down payment of 20 percent to avoid paying private mortgage insurance (PMI)—in case you're wondering where the 20 percent number comes from. Far from most types of insurance, this legally binding document protects the lender's vested interest in the home, not the homeowner.

When you make a down payment of less than 20 percent, your mortgage loan-to-value (LTV) ratio is over 80 percent. As such, you present a higher risk profile to the lender, which necessitates purchasing private mortgage insurance to offset this risk. PMI will increase your monthly mortgage costs until you have accumulated enough equity in the home that the lender no longer considers you high risk. So, there are advantages to making a larger down payment.

Another advantage is lower interest rates. A solid down payment may signify that you're less likely to default on your loan, which may prompt lenders to reduce your mortgage interest rate. Even saving a fraction of a percent on your interest rate could save you thousands of dollars over the life of your loan. Still, your overall interest will depend on factors other than your down payment, such as credit scores, home price, and loan term.

Down Payment Requirements by Loan Type

As mentioned, down payment requirements vary depending on the type of mortgage you qualify for. For instance, if you qualify for government loans, your down payment may be as low as zero.

There are several options for a mortgage with no or low down payment:

1. Veterans Affairs (VA) Loans
   The Department of Veterans Affairs partially guarantees these loans. VA loans typically have low down payment requirements, are more flexible in terms of credit score, and carry lower interest rates than conventional mortgage products. However, you must be a veteran, active-duty service member, member of the National Guard, reserve, or an eligible surviving spouse of a veteran to qualify.
   
   
2. FHA Loans
   Insured by the Federal Housing Association, these loans require a lower minimum down payment than many conventional loans. Many first-time buyers may find FHA loans the more affordable mortgage option.
   
   
3. USDA Loans
   The U.S. Department of Agriculture (USDA) provides zero-down homeownership opportunities to low- and moderate-income Americans. However, you must live or plan to live in an eligible rural area to qualify.

It's important to weigh your mortgage options before committing to a down payment amount. Even though a 20 percent down payment is ideal, you shouldn't fixate on it. The right amount depends on numerous factors, including how much you can comfortably afford. You don't want your down payment to be so large that it leaves you with too little savings.

Ready to Purchase Your First Home?

Our agents have the expertise and years of experience to guide you through the process. Contact us today to view North Canton homes for sale.

While the hot seller's market of the last few months has begun to cool down, there are still many people out there looking for North Canton homes for sale or Akron homes for sale. Today's Ohio homeowners easily benefit from the great interest in the local area and meet qualified buyers.

Our real estate agents know you want to get the most value for your home and finish the sales process as quickly as possible. In fact, it's usually for the best when the sale is complete within 30 days. After the 60-day mark, buyers may wonder if something is wrong with the home.

At 90 days, most homes need to be re-listed, which can add months to your timeline.

How can you avoid these issues? To get the results you want, it's crucial not to go it alone.

Many homeowners have been exploring "FSBO" – for sale by owner, the name given to selling without a real estate agent. They may feel that they'll make more money without paying a commission, but the situation is a little more complex than it looks at first.

Selling without an agent can cost you both time and money. On the other hand, the insights of an experienced agent help you maximize your returns, no matter what the housing market looks like.

Let's dive deeper and see how sellers like you benefit from working with an agent:

• An Agent Attracts More Offers for Your Home
  One of your agent's biggest roles is managing your home's marketing. Agents work hard to publicize your home and keep you in the loop about what's been done on your behalf. They'll lead in developing your listing, open house events, virtual tours, staging, and much more.
  
  
• An Agent Is Your Interface to Buyers
  Any time a home goes on sale, some people will only show up out of curiosity. Your agent helps separate serious and qualified buyers from the rest,  saving dozens of hours you would otherwise spend having conversations that might not go anywhere.
  
  
• An Agent Helps You Price Your Home to Sell
  For the best results, pricing any home needs to be done scientifically. A "priced-to-sell" home is aligned with recent sales of similar homes in the same area. Your agent will do all the research to find a price point that meets your needs while still being enticing enough to draw people to the property.
  
  
• An Agent Helps You Avoid Legal Liabilities
  One detail many buyers and sellers alike aren't aware of is the way an agent protects you from serious paperwork errors. A small oversight in how you describe your home or the forms required for closing can leave you vulnerable to fines, legal problems, and much more.
  
  
• An Agent Helps You Negotiate
  A "bidding war" is the dream scenario for many sellers—it means you have plenty of buyers engaged and interested. But that doesn't mean you simply sit back and watch the sparks fly. Whether you need to consider multiple bids or make a counter-offer, an agent's expertise is invaluable.
  
  
• An Agent Supports You in Informed Decision-Making
  During the selling process, emotions can run high for parties on both sides of the transaction. Your real estate agent is an ally who brings a useful outside perspective to every major question. This has helped countless sellers throughout Ohio make decisions they feel truly confident about.

Contact us at DeHoff Realtors to learn more about your selling opportunities.