You can purchase a home with ZERO $$$ Down – Breaking down the myths

first-time-home-buyer-e1527016184953.jpg

Myth: You need a 20 percent down payment to buy a home


18402657_10100608657344718_7998658965658518847_n

John Reuter, Broker/Owner – The Reuter Team

In this down payment article:

Sub-20 percent-down mortgage options: Six ways you can buy a home with little or no money.

Closing costs: How to deal with fees above and beyond the down payment itself.

Down payment pros and cons: Why it’s often better not to make a down payment, and when you might want to.


You don’t need a 20 percent down payment

The 20 percent down payment myth has stopped many would-be home buyers from owning a home.

It’s a left-over idea from generations ago.

So-called financial experts, parents, college professors, and even real estate professionals pitched 20 percent down as a wise move. But is it?

Making a large down payment on a home can put you at more risk than making no down payment at all.

Plus, many programs in Wisconsin waive the down payment requirement.

Still, today’s home buyers are the unfortunate recipients of wrong information. What will it take for them to disregard the mythical 20 percent figure?

If you’re reading this (and are willing to read it until the end), you’ve proven that you are ready to reach a higher plane of home buying wisdom.

Can I buy a house without 20 percent down?

The simple answer is yes.

In fact, the massive upfront cost is not even typical. The average down payment for first time home buyers is just 6 percent according to the National Association of Realtors.  However, in our local area we see about 60-70% of first time home buyers utilizing government loans (FHA, USDA, and VA loans – require between 0-3.5% down).

The 20 percent down payment myth is circulated to this day because you need 20 percent down to avoid mortgage insurance with most conventional (non-government) loans. But, as many homeowners have discovered, PMI is not bad. In fact, many buyers in previous years have made $13,000 per year by investing in PMI.

Since the advent of FHA loans in 1934, mortgages have not required 20 percent down. That was more than 80 years ago!

The following are ways in which you can buy a home with little down payment available, or even if you have no money at all.

The FHA mortgage requires just 3.5 percent down. But most first-time buyers don’t know that the down payment can be sourced from a financial gift or approved down payment assistance program.

VA mortgages require zero down. Plus, they require no monthly mortgage insurance, helping you buy more house for less money. 100 percent of the closing costs can come from a seller concession or via gift funds from family. Those with current and former military service are likely eligible.  In addition, they Veteran’s are eligible for savings through the Homes for Heroes Program.  Homes for Heroes rewards Heroes for their service by providing them with significant savings from the Realtor, Lender, Home Inspector, Title Company, and various other real estate services.  The Reuter Team is the premier Homes for Heroes team in Wisconsin.  We can be contact at 608-834-3341 for more information or e-mail john@thereuterteam.com

Conventional loans offer down payments as low as 3 percent.

USDA home loans require no money down. Property eligibility is location-based.  In South Central Many areas qualify for USDA home loans.  In Dane County several a few of the areas that qualify are Deforest, Oregon, Stoughton, and Waunakee.  Most homes in Columubia and Dodge County also qualify for USDA.  The loans are backed by the United States Department of Agriculture and offered by most mortgage providers nationwide. These loans are not for farms, but for typical single-family homes that happen to be in less-dense areas. USDA loans are available in every state.   Contact us for a list of areas in Wisconsin that are eligible for a USDA loans

5 percent down mortgage

For buyers purchasing their primary residence, not a second home or rental, many programs allow down payments of just five percent. Both Fannie Mae and Freddie Mac allow this.

10 percent down mortgage

If you can come up with 10 percent down, you have more programs available — especially if your credit is less than pristine or your debts are on the high side. FHA, for instance, will allow a FICO score as low as 500 if you put 10 percent down.

Piggyback loans require between five and ten percent down. Typically, you get an 80 percent first mortgage, a 10 percent second mortgage and put ten percent down. This eliminates the need for mortgage insurance. Piggyback loans, also known as 80/10/10 or 80/15/5 loans, are best for those with good credit and at least 5 percent down.

Down Payment Assistance (DPA) programs are becoming more popular by the day. Government-run programs, plus approved non-profits, offer gifts and no-interest loans to support homeownership in select communities. Nearly 90 percent of all single-family homes in the U.S. are eligible for some kind of DPA according to a study by RealtyTrac. All the major loan types mentioned above allow the borrower to apply DPA funds toward the required down payment, if any, and in some cases, closing costs.

homes_for_heroes_LP

Law Enforcement, Firefighters, Military, Medical Professionals, and Teachers save thousands when they buy or sell a home!   

What about closing costs?

Keep in mind that you will pay closing costs even if you select a loan program with no down payment requirement.

Closing costs can range from 1 percent-4 percent of the home’s purchase price depending on many factors, such as your lender fees, property taxes, and escrow fees. The following are ways to help you pay for closing costs. You can realistically buy a house with no money if you get closing cost assistance in combination with a no-down-payment loan.

Closing Cost Credit for being a community Hero  

Community Heroes such as, Police, Fire, Medical Professionals, Teachers, and Military save thousands on their home purchase.  The average Hero saves over $3,000!  To learn more visit www.wiheroes.com or you can contact the Wisconsin Homes for Heroes affiliate:  John Reuter at 608-669-4226 or john@thereuterteam.com

Lender credits help with closing costs

Request a lender credit in return for a slightly higher mortgage rate. The credit helps pay your mortgage closing costs and can even be applied to prepaid property taxes and other fees.

Seller concessions reduce or eliminate closing costs

The seller can issue a closing cost credit to pay for all or part of the buyer’s closing costs. Seller concessions are more available in markets that favor the buyer.

Down payment assistance can go toward lender and closing fees

Some mortgage types allow you to pay 100 percent of your closing costs with a down payment assistance program from a government or non-profit entity.

4 Reasons It’s Better Not To Put 20 percent Down

More cash available. It’s always a good idea to have cash on hand in case of a job loss or other unforeseen financial event. Those who put all their liquid assets into a down payment have no buffer to weather the storm.

Buy sooner. Home prices are rising about 5 percent per year. That’s $10,000 annually on a home costing two hundred thousand dollars. Waiting to save for a down payment leaves you chasing higher home prices.

Invest elsewhere. You could deplete your 401k for a down payment. It’s allowed. However, you’re probably better leaving retirement funds intact, or continuing to invest there. Removing funds for a down payment severely limits compound interest you could have earned. You might regret it at retirement.

PMI is actually a good investment. You might hear advice that you should put 20 percent down to avoid mortgage insurance. According to our research, PMI is a good investment yielding a 530 percent return over the past five years. Ask yourself this: would you pay $8,100 to get a paycheck of $43,000? That’s exactly what PMI holders have done over the past half-decade.

3 drawbacks of making a small down payment

Mortgage insurance. Yes, it’s an extra cost. As mentioned above, though, it’s can be a good investment.

Higher mortgage rates — maybe. Making a small down payment typically only increases your rate for conventional loans. However, low down payment government-backed loans like FHA, VA, and USDA all come with lower rates than a conventional mortgage with 20 percent down.

Less equity. You will have less equity in the home if you make a small down payment. Arguably this is not a downside at all. Imagine the housing market turns south. Your home loses 20 percent of its value. Would you rather have lost your own money, or the bank’s?

How do I check my low down payment eligibility?

Your eligibility for a zero-down or low-down payment loan is available by talking to a lender or submitting your application online for review.  Contact us for a list of super awesome lenders that we work with and they can provide you a variety of customized options to fit your unique situation.

Within a day, you will likely know if you qualify. The lender reviews your income, credit, and other factors to determine your eligibility for certain programs. You choose which is best for you.

You might be surprised at what you qualify for.

It’s a terrific time to be a home buyer. Home values are rising in many U.S. markets; mortgage rates are about half their historical average; and, there is an abundance of low- and no-down-payment mortgages available for today’s buyers.

Get mortgage rates for loans with less than 20 percent down

Compare today’s mortgage rates and verify what you’ll qualify for. Complimentary rate quotes are available with no obligation to proceed, and with no social security number required to get started.

If you would like more information on local lenders, the Homes for Heroes Program, or the home buying/selling process please complete the contact us section below.  – Thanks

Contact us

400dpiLogoCropped

Let’s get dreamy on this rainy day…

Luxury--ml-083-r3-704x1722hEver wonder what the most expensive home for sale in Wisconsin is?  We have piled a list of the 100 Most Expensive Homes for Sale in Wisconsin for you to enjoy.  Currently the top spot goes to 1260 Deer Path in the Town of Phillips in the county of Vilas.  With 5 bedrooms, 4.5 baths, over 7000 sqft and 16 acres the price tag is just $3,250,000.00.  Chump change right?  Feel free to check out some of the homes, relax, and day dream 🙂

Our team is dedicated to giving back to the Heroes that serve our community and that serve the nation. We reward Heroes when they buy or sell a home by providing them with significant savings. Average Hero saves over $3,500! To learn more visit www.wiheroes.com or contact John Reuter (608) 669-4226 / john@thereuterteam.com

 

Homes for Heroes

Should I Downsize My Home?

Downsizing-TipsIt seems like only yesterday you were having your first child and setting up a home for a growing family. Fast forward to today, when your youngest calls to say she’s found the perfect apartment and that the chair from the family room would really fit into her new living room. Your downsizing journey has officially begun.

It’s safe to say homeowners typically don’t daydream about buying a smaller home. But minimal maintenance is definitely an upside to not living large. After all, the time and money you used to spend on cleaning and upkeep can now go toward fun things. That’s why some people see downsizing as a step forward, not backward. If you’re thinking less space is the place, you’re not alone.

 

HOW YOU KNOW IT’S TIME TO DOWNSIZE

 

Choosing less space often has to do with a desire to live simpler, whether you’re retiring or just want an eco-friendly, low-maintenance lifestyle. When children grow up and move out of the family home, for example, Mom and Dad are left with an empty nest that’s too big for them. Or if adult children have moved out of the area, parents may want to live closer to them and the grandchildren.

Many adults 55 and older are leaving the suburbs behind and moving into condos or lofts in downtown areas. Not only are these homes easier to maintain, but they are also in walkable neighborhoods with easy access to amenities such as culture, restaurants and nightlife.

Sometimes the choice to downsize isn’t actually a choice. Some life events, such as a divorce or unemployment, are unexpected and force you to find a smaller home for financial reasons.

 

WHAT TO CONSIDER BEFORE DOWNSIZING?

 

THE QUESTIONS TO ASK YOURSELF

 

Does size matter to me?

Think about how much your identity is wrapped up in your house.

“For most of us, where we live not only fulfills our needs for shelter but also tells the world who we are. “More than any other possession, a house is used by our family, friends and neighbors as a barometer of our status and importance within the community,” says Genevieve Ferraro, who knows what it’s like to move from a large home to a smaller one: her 1,800-square-foot house in Chicago is next to one twice that size and the only one in her neighborhood that hasn’t added additional rooms.

“Moving to a smaller home goes against ingrained conventional thinking that ‘bigger is better,'” she says.

Meaning that your psyche may feel like ‘smaller is worse.’

 

Will I miss some important things about a more spacious home?

 

Ask yourself: Will moving into smaller digs feel like a step forward, because I’m living more environmentally friendly and simplifying my life? Or will it feel like a step backward?

Kerri Fivecoat-Campbell, 45, blogs about her experiences after moving from a 1,100-square-foot house in Kansas City, Kansas, to a 480-square-foot home in the Ozark Mountains of Arkansas.

She says there are some things she misses about her larger house (it was more centrally located, for example), and she kind of wishes her small house had cathedral-style ceilings to make the rooms look a little more spacious. But she loves that it takes her only two hours to clean her entire house. “And that includes cleaning out the refrigerator,” she says.

Karen Scott, 55, echoes the sentiment, saying that moving into a smaller house can be “amazingly freeing.” She and her husband moved from a large house in southern Florida to a smaller one in Stuart, on the Treasure Coast. With her other, bigger house, says Scott, “Every weekend, I spent from four to eight hours a weekend, just doing yard work in the summer. Plus, the house was twice as large, and even though I had help, it was still a lot of responsibility. My husband doesn’t have to worry about cleaning the pool and mowing the grass, either. It’s great how much more time you have to do what you want to do. I loved puttering in my yard, and I still do, but on my terms now.”

 

How will other life events affect my living in a smaller home?

 

Consider possible scenarios you may not expect, such as adult children moving back home.

One of Scott’s daughters, a 23-year-old, may move into the “downsized” home while she attends a nearby university. Scott, who co-owns a company called Asset Advisers and has a consulting business in commercial real estate, says she won’t regret downsizing if her daughter moves in, but it’s a good cautionary tale to be aware of.

After all, one grown adult who’s often off at college may not be too cramped, but what about a son or daughter (or even another relative) who may need to move in for other reasons? Would you enjoy sharing one bedroom and bath with them?

As you look for a new home, make sure it fulfills your physical and emotional needs as well as your financial ones. Just because you can find a bargain doesn’t mean the home is worth it. After all, if you’re going to make the effort to move, you should do it right.

 

THE COST TO YOU

 

It seems simple enough: you’re going to spend less than you would for a larger house, so the only financial consideration is, do you like to have more money?

Answer: Yes.

Done. We’re moving. Easy-peasy.

Except — not so fast. Genevieve Ferraro (whose website, The Jewel Box Home, has the tagline “celebrate living small”) points out that it’s easy to forget that fewer rooms will mean less space for all of your stuff, and it’s even easier to forget that that might cost you money.

 

How much will it cost to replace the furniture?

“When moving to a smaller home, even furniture needs to be downsized,” says Ferraro. “Large pieces overwhelm small spaces.”

So if you have furniture that’s too large for some of your rooms — that king-sized bed may not fit comfortably in a bedroom made for a prince — you may feel obliged to get rid of the bed and buy something else.

Ferraro points out that smaller furniture costs less than larger pieces, so that will be a relief to one’s bank account. Still, if you’re spending a lot of money to replace furniture in order to save money eventually, you may start to wonder, “Why am I making this move again?”

 

How much will it cost to get rid of the stuff I don’t need or won’t fit?

If you don’t have a thorough plan for selling or giving away your things and you do it in a rush (giving valuables away to places and people you don’t truly care about), you may start to feel right away that you’re losing money.

Consider things like family heirlooms. Fewer rooms means less storage space. Karen Scott had to answer the question all downsizing homeowners need to ask: “What were we going to do with all of our antiques and treasures that we could not take? I had to make some very tough decisions, and there were some casualties. You hold onto antiques because of family connections, but really, they are burdens, and you are only a steward.”

 

How much will I get when I sell my current home, and will it help cover the cost of buying my new home?

Kerri Fivecoat-Campbell says that when they sold their home two years ago, they weren’t able to make as much on it as they thought they would (join the club), and then their small house cost more to build that they originally anticipated, because they decided to have an additional home office separate from their other home. So instead of spending $45,000, they wound up owing their bank $70,000.

“Everything cost more than we thought it would,” says Fivecoat-Campbell, who also hadn’t planned on having to construct a water well.

But she is seeing a return on their investment in downsizing. She estimates that she and her husband save $500-$600 a month with a smaller mortgage, less property tax and tinier utility bills.

 

THE HOUSE FOR YOU

 

In this particular stage, you’re moving because your current home no longer fits you, your lifestyle or your income. You’re looking for something more suitable or more economical, and your search should reflect that fact.

When it comes to low maintenance and convenience, an “attached” home — such as a townhouse, condo, loft or co-op, in which you share walls and/or common areas with your neighbors — is a popular choice. You won’t have to worry about fixing the roof or mowing the lawn. But keep in mind that these homes are managed by homeowners’ associations (HOAs), which collect monthly fees for maintenance services and impose rules for the community, so research the HOA before buying in a particular building.

When it comes to home style or architecture, the lower the maintenance, the better. Stay away from Victorians, Arts and Crafts or other styles that may require extensive renovations and major upkeep. Keep it simple. Ranchers and bungalows are your best bet for low-key living.

Lastly, when shopping for a smaller home, know how small you’re willing to go, and be prepared to make some adjustments. For instance, Kerri Fivecoat-Campbell notes that not every married couple or family would necessarily enjoy the intimate quarters a small house provides.

“In our house in Kansas City, we had a television in every room, and so if my husband wanted to watch something else, he’d go off into another room. But here, we have one television, so we’ve had to learn to share the remote,” she says, sounding amused. “And that’s been a good thing. I would think that even for people with kids, a smaller house would bring people closer together. I know a woman who lives in a 5,000- or 6,000-square-foot house, and when everyone lives in a separate wing of the house, I’m not sure how, as a family, you become closer.”

 

THE NEIGHBORHOODS AND AREAS FOR YOU

 

If you’d like to stay in the city you’re in, look for neighborhoods or communities with detached homes, townhouses or condos. You’ll typically find a higher concentration of them closer to the center of town or downtown. This is especially helpful if you work downtown and want to keep your commuting costs low.

Oftentimes these neighborhoods are also pedestrian-friendly, meaning everything you need can be found within walking distance. Also consider buying in up-and-coming neighborhoods: you might find an affordable home that could potentially increase in value once the area is fully developed.

Also research builders that specialize in smaller homes, says Genevieve Ferraro, observing that Robinshore, headquartered in Gainesville, Florida, is “jumping on this smaller home concept bandwagon” and that Maine-based Devon Woods also specializes in creating subdivisions with smaller houses.

And if you like really small homes — tiny homes, they’re often called, the kind that make you feel like you’re living in a big closet — there are builders who specialize in that.

And, of course, your real estate agent should know where the smaller — and good-quality — houses are.

Article Credit: Geoff Williams and Annalisa Burgos

Is a housing crash inevitable? – A must read

JOHN EDITED

Broker/Owner

Is a housing crash inevitable?

How many of us have heard, “the real estate market cannot continue the way it is”, and that is “has to crash soon”.    I am going to be 100% honest with you.  Can the real estate market in Sun Prairie, Verona, and other communities continue at the current pace?  The answer is no, but that does not mean that the market is going to crash like in 2008.  The economy in the United States and Dane County is great and is not showing any signs of slowing down.   The real estate market is just like the stock market.  It has ups and downs. You look at investments over a period of time.  Many new Realtors® don’t remember in 2013 when home values went from $212,000 to $195,000 and then in 2015 values went from $235,000 to $230,000.  Everyone was in a panic because of the ‘looming housing crash’, but that crash never happened because the market did what is normal.  During the two years where the market decreased (2013, 2015), the average home still increased in value by 4.5%.  Look at the two graphs below, one shows the drastic increase in home prices before the market crashed on the left in red, and the current price increases (on the right).

PicMonkey Collage

Home prices increased 42% from 2000-2008.  Prices went from $200,000-$340,000.  That steep of an incline in any market is not normal.  If you look below it shows a normal real estate market.  This is between years 1963-1999.

Capturekkk

With our knowledge and experience in the real estate industry we predict a slight decline (1%-2%) in home prices over the next 18 months. During the next 36-48 months we predict home prices will increase 3 to 4 percent.  So the question, “Is now a good time to buy”?  The answer depends on if you are planning to keep your home (investment) for less than 2 years or more than 2 years.  If less than 2 years we would probably wait a year.  Yes, a licensed Real Estate Professional just told you it would be better to wait to buy if you are keeping your home less than 2 years.  If you plan on keeping your home for more than 2 years we would recommend taking advantage of the lower interest rates and gaining equity as rent prices continue to rapidly increase in Dane County.

 
Thinking about selling your home?  Click here to get the current value of your home!

Buying a home?   Click Here (VIP Code Badgers) to get access to HomeScout, the most advanced home search available!

Sources: Wisconsin Realtors Association, U.S. Census Bureau, Irreational Exuberance 2nd Ed.

John Reuter is a licensed Real Estate Broker with Home Buyers Marketing II Inc., and Broker/Owner of The Reuter Team.   To learn more about our team, and how we reward Heroes that serve our communities and the nation we welcome you to visit our website www.thereuterteam.com or follow us on Facebook.

Welcome Lexi Houghton

Lexi Houghton

Lexi Houghton – Realtor with The Reuter Team

We are exciting to announce the addition of Lexi Houghton to The Reuter Team.  Lexi bring years of customer service, enthusiasm, and a passion for homes.  Lexi is go to specialist for real estate in Waterloo and surrounding areas.  She is committed to giving back to Heroes that serve our community and our nation through the Homes for Heroes Program.   The Homes for Heroes Program rewards Law Enforcement, Firefighters, Medical Professionals, Teachers, and Military for their service by providing them with significant savings when they buy or sell a home.  If you would like more information please visit www.wiheroes.com or contact her at lexi@thereuterteam.com

 

Show Buttons
Hide Buttons