Real Estate Information Archive

Blog

Displaying blog entries 1-10 of 42

Mortgage Rate Questions

by Terry Sullivan - Lyons-Sullivan Realty

Regardless of what a lender quotes on mortgage rates, the actual rate a borrower pays is based on a number of variables. Lenders determine whether to loan money and at what rate based on the risk involved with the transaction.Sorry not available.png

Factors that increase the risk that the loan will be repaid will proportionately increase the interest rate charged to the borrower. If the risk becomes too high, the loan will not be approved.

  • Loan amounts – conventional mortgages above conforming limits as set by Fannie Mae and Freddie Mac are considered jumbo loans and generally have a higher interest rate.
  • FICO score – the lowest interest rate is reserved for the highest score; the lower the score, the higher the rate the borrower will pay.
  • Occupancy – borrowers occupying a home as their principal residence are considered a better loan risk than second homes and investment properties.
  • Loan purpose – purchase transactions generally have the lowest interest rate with refinancing for better rates and terms being priced slightly higher. An even higher rate might be charged for refinancing and taking cash out of the property.
  • Debt-to-Income Ratio – a borrower’s monthly liabilities divided by their gross monthly income develops a ratio that helps lenders to assess the borrower’s ability to repay the mortgage.
  • Property Type – some types of property are considered higher risk than others which could adversely affect the rate.
  • Loan-to-value – the lower the percentage of the loan to the appraised value of the property will generally lower the interest rate.

Any combination of these factors could limit a borrower’s ability to secure a mortgage at the rate initially quoted. Pre-approval by a trusted mortgage professional can be the best way to know what rate you can expect to pay. Please call for a recommendation of a trusted mortgage professional.

Real Estate and Investing

by Terry Sullivan - Lyons-Sullivan Realty

Consider the goal of funding a child’s college education in the future. If “other people’s money” in the form of a scholarship is not a possibility, there still may be another way to use some “other people’s money.”26458431-250.jpg

A $25,000 investment into a mutual fund paying 5% would earn $1,250 in the first year. Alternatively, the $25,000 as a 20% down payment to purchase a $125,000 rental home appreciating 3% a year would have gone up by $3,750 or three times that of the mutual fund in the first year.

The mutual fund’s growth depends on the value of the money invested. Rental real estate benefits because a 20% down payment controls a much larger asset because you’re using “other people’s money.” Leverage allows the investor to profit not only from the amount of cash invested but from the value of the investment.

With a 20% down payment and current interest rates, a typical rental would have a positive cash flow. In ten years, the equity could be $75,000. On the other hand, the $25,000 initial investment in a mutual fund earning 5% annually would only grow to about $40,000 in the same 10 years. It would require an additional $2,700 each year to reach the same $75,000 value.

Leverage is just one of the many benefits that make rental real estate the IDEAL investment. Whether you are saving for higher education, retirement or wealth accumulation, consider rental real estate. Using single-family homes as investments are attractive because homeowners have a better understanding than many other investments and self-management is a possibility.

You Could Be Wrecking Your Home — And Not Know It (Yet)

by Terry Sullivan - Lyons-Sullivan Realty

You haven’t felt like this since you were a teenager. You have a crush on your new house. (You’re officially a home buyer — wait — owner!)

It’s soooooo great. You love its quirks. It’s your very first home, and you want to do everything right.

The feeling is fun, but also scary: You remember too well how badly you screwed up that first crush as a teenager (so embarrassing. Don’t ask).

Could you screw this up too? 

No need to freak out. You can make this love a lasting one. For now, keep an eye out for these common no-nos that can result from good intentions.

#1 Using Bleach as a Cure-All

If bleach is your chicken soup for whatever ails your home, proceed with caution.

Bleach can:

  • Eat through the sealant on stone surfaces like granite
  • Discolor laminate and colored grout
  • Fade enamel and acrylic tubs
  • Dissolve vinyl and linseed-based flooring like linoleum
  • Corrode seals within the disposal

In addition, bleach kills mold on non-porous surfaces, but can feed future mold growth on absorbent and porous materials, like grout. Yep, whitening grout with bleach creates a mold feeding ground. Whoops.

Better options? Water and vinegar are all you need for most cleaning jobs. If you’ve got a heftier mold or mildew issue, apply a commercial anti-fungal product.

And to clean your disposal, just dump cold water and ice cubes down the hatch.

Related: Popular Tips (Like Using Lemon in Your Disposal) That Cause More Harm Than Good

Gray home exterior and tree-filled yard

#2 Training Ivy to Climb Your House

You’ve dreamed of living in an ivy-covered English cottage since childhood. Well, sorry for this, then:

“Anything that climbs on the house will damage it,” says Marianne Binetti, a speaker and author who leads garden tours around the world.

The horticulture expert made the mistake herself.

“It looked cool for a while, but it dug into the siding so even when we pulled it off, it left damage. And it climbed up the drain pipe and tore the gutter off the house,” she says.

By sending roots beneath siding and shingles, ivy enlarges tiny cracks in brick and wood, introducing entrances for moisture and insects, says Jay Markanich, a certified home inspector based in Bristow, Va.

#3 Relying on Chemical Drain Cleaners

Clogged sink! Again! Pay a plumber more than $100, or grab a $10 product at the store? You can totally handle this one yourself, right?

Possibly. But the most common active ingredients in these solutions, hydrochloric acid and sulfuric acid, can erode your pipes.

Even the old baking-soda-and-vinegar medley can result in cracked pipes, as the reaction causes a build-up of pressure.

Old-fashioned “mechanical” methods — your plunger, a drain snake, or a handy $2 gadget called the Zip-It — are safer and more effective, according to “Consumer Reports.” 

And if that fails, that call to the plumber doesn’t sound so bad compared to an eroded or busted pipe, no?

#4 Using Glass Cleaners on Mirrors

Your newfound house crush has you scrubbing and spritzing everything. Look at you being so lovingly domestic!

But be cautious with your mirrors. Spraying can lead to what’s ominously called “black edge” — created when a liquid seeps beneath the reflective backing and lifts it.

Instead, clean mirrors with a lint-free microfiber cloth, dampened with warm water — especially mirrors in expensive, installed items like vanities and closet doors. 

Avoid the edges and dry immediately with a second cloth.

#5 Planting Trees ThisClose to Anything

Kind of like adopting an adorable, tiny piglet on a whim, you’ve got to remember how a baby tree is going to grow, and what it’s going to require at maturity.

You probably don’t want a 70-pound pig digging up your daisies, and you definitely don’t want a tree root pushing through your driveway, sidewalk or — so much worse! — your foundation.

And watch out for evergreens. If planted too close to the house, they cast too much shade, encouraging mold growth, Binetti says.

Position trees according to its maximum height, crown size, and root spread. For perspective, even a small tree reaching less than 30 feet tall needs at least 6 feet of clearance from any exterior wall, according to the Arbor Day Foundation.

#6 Using the Wrong Caulk

As a dutiful homeowner, when you see failing caulk, you fix it. But the term “caulk” is as broad as the word “glue.”

There’s kitchen and bath caulk, concrete caulk, gutter caulk, mortar caulk — and that’s just the tip of the caulk-berg. And just like you’d never fix broken pottery with a glue stick, you don’t want to pick the wrong caulk either.

Markanich sees plenty of damage done when the wrong caulk is used. Such as using silicone caulk (totally great on non-porous surfaces like bathtubs) on concrete or brick or other porous surfaces. It won’t adhere, and moisture can seep in, compromising the bond and the structure.

Before heading to the store, check an online buying guide to find the right match for the project you’re doing. Odds are there’s a specific caulk just for it.

#7 Over-Sealing Countertops

Take care of your countertop, but don’t smother the darn thing.

Applying sealant too frequently can create a cloudy or streaky appearance on surfaces like natural stone, concrete, butcher block, and glass, which typically only require occasional resealing to resist stains. (Quartz, laminates, and solid surfaces like Corian are best left sans-sealer.)

How to know it’s time to reseal? Drip some water on a high-use area of the countertop. If the water doesn’t remain beaded after 15 minutes, consider resealing. 

But always defer to your manufacturer’s recommendations. Different materials can have different needs.

#8 Over-Mulching

Nothing feels closer to giving your home a hug than being elbow deep in a landscaping project. But when it comes to mulch (which is so great, for so many reasons), it turns out elbow deep is a little too much love.

A layer thicker than 3 inches can suffocate plants and prevent water from reaching roots, so spread thoughtfully.

#9 Piling Firewood Next to Your Exterior Wall

Your fireplace is the highlight of your home. You love it. That’s why you keep your firewood right outside the back door, for easy access.

Oops. Storing firewood against your home’s exterior walls is akin to opening a B&B for termites.

In fact, “anything that creates a dark, climate-controlled area near the house will invite termites” and other pests into your home, Markanich says.

In one of the worst termite cases he’s seen, he found an enormous termite colony on an exterior wall in a bathroom, which got its foothold in a pile of bricks outside.

Twenty feet is a safe distance from home for firewood — and still not too far to go to fuel your awesome fireplace.

Which Way Should Your Ceiling Fan Turn in Summer?

by Terry Sullivan - Lyons-Sullivan Realty

Most fans are reversible: One direction pushes air down, creating a nice summer breeze; the other direction sucks air up, helping you distribute heat in winter. There’s normally a switch on the motor to change the fan’s direction.

Is your fan turning in the right direction for summer?

  • Stand beneath the running fan, and if you feel a cooling breeze, it’s turning correctly.
  • If not, change directions, usually by flicking a switch on the fan’s base.

Typically, it’s counterclockwise or left for summer and clockwise for winter, but the best method is to follow the steps above.

Funny note: We read on Yahoo! that one clever person used bubbles to see which direction his fan was blowing.

FHA and VA

by Terry Sullivan - Lyons-Sullivan Realty

In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. The main reason there haven’t been many assumptions in the past 25 years is that interest rates have been steadily going down and if a person has to qualify, they might as well do it on a new loan and get a lower interest rate.

Based on projections by Fannie Mae, Freddie Mac, the MBA and NAR, rates for the second half of 2017 and 2018 are expected to be higher. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages in the recent past, it becomes more advantageous to assume the existing mortgages.

FHA and VA loans originated with lower than current interest rates have great advantages for buyers and sellers.

  1. Interest rate won't change for the qualified buyer
  2. Lower interest rate means lower payments
  3. Lower closing costs than originating a new mortgage
  4. Easier to qualify for an assumption than a new loan
  5. Lower interest rate loans amortize faster than higher ones
  6. Equity grows faster because loan is further along the amortization schedule
  7. Assumable mortgage could make the home more marketable

An Assumption Comparison can help determine the savings and financial benefits of an assumable mortgage with a lower rate.

IRS Loan Requirements

by Terry Sullivan - Lyons-Sullivan Realty

Anytime a lender and borrower can agree on rates and terms, it can be a good match but IRS has specific rules that govern the transaction especially when the parties are family or friends.26614035-250.jpg

The loan must be done in a business-like manner with a written note specifying the loan amount, interest rate, term and collateral. IRS requires that the mortgage be a recorded lien to allow the interest deduction.

Sometimes, a friends and family situation might have a less than normal interest rate on the mortgage. However, the rate charged in the note is regulated by the minimum applicable federal rate which is published monthly by IRS based on current Treasury securities. For July 2017, the rate is 2.57% for terms over nine years.

The seller must report the interest paid to them along with the name, address and Social Security number on schedule B when the buyer uses the property as their principal residence.  A mortgage between family and friends can be good for both parties. It may allow the borrower a slightly lower rate without the expenses of a traditional lender while giving the note holder a higher rate than they can earn in available investments.

Your tax professional can guide the transaction whether you’re a buyer or a seller and your real estate professional can help arrange to have the documents drawn and filed.

The Most Annoying Things About Summer — And What to Do About Them

by Terry Sullivan - Lyons-Sullivan Realty

Summer should be the stuff dreams are made of: long, sunny days and warm nights filled with important questions like, “Ice cream on the porch, or another pint on the patio?”

Summer also comes with bugs, heat, humidity, and other annoyances around the house. So this year, eradicate 13 of the worst irritations of summer before they crush your summer buzz. Here’s how:

#1 Mosquitoes

These ubiquitous party crashers can suck the fun out of any outdoor fiesta.

What to do:

Clean your gutters. “That’s often a main, and neglected, breeding site for mosquitoes,” says Chris Enroth, a horticulture educator with the University of Illinois Extension office in Macomb.

Plug in a fan. Or install a ceiling fan. “Mosquitoes don’t like flying in high wind,” Enroth says. Cheers for cool breezes sans bug bites!

Related: Is Your Ceiling Fan Turning the Right Way for Summer?

Modern kitchen with wood floors

#2 Doors That Stick

Wooden doors can swell, outgrowing their jambs (what holds doors steady as you open and close them) on humid days, causing an annoyingly sticky situation.

What to do:

Tighten the hinge screws. There’s a chance your door’s just slipped out of alignment.

Scale back the weather stripping. If you installed it in the winter to keep out drafts, it could be too thick come summer.

Shave down the door. As a last resort, use a planer or sander to trim down the door ever so slightly, concentrating on the area with a visibly worn finish. Seal the newly exposed edge with paint or wood sealant to block out future humidity.

#3 Carpenter Ants and Carpenter Bees

Although named for a helpful trade, both carpenter ants and carpenter bees often make their nests by burrowing into your home’s wood, which can cause some really pricey damage on top of their annoying presence.

What to do:

Keep all exposed wood sealed or painted. Don’t forget the bottoms of window sills!

Direct water away from wood.Gutters and flashing will help keep wood dry, says Bob Boucher, owner of a handyman company in Concord, N.H.

Evict existing colonies. Look for sawdust trails to find the entrance, then use a rinsed squeezable ketchup bottle to blow an insecticide dust or boric acid powder into the hole.

#4 AC That Causes You to Freeze in One Room and Sweat in Another

Moving from your first-floor kitchen to a second-floor bedroom shouldn’t require a wardrobe change.

What to do:

Check your ductwork. Look for unsealed joints or hire a pro to make sure your ducts are properly sized. Both can affect your system’s ability to deliver conditioned air to each room.

Set your whole-house fan to “on.” This continuous circulation will mix the air so no space is too hot or too cold.

Direct more cool air upstairs. Look for ductwork dampers in the basement to open during the summer months.

#5 Fruit Flies

Because fruit flies lay their eggs on decaying organic material (yeah, yuck), summer’s bounty of fresh fruits and veggies can invite these disgusting freeloaders into your home. There’s a ton of solutions on the Internet, but preventative measures work best.

What to do:

Keep sinks, drains, and disposals clean. Even dirty dishes can harbor fruit flies.

Freeze food waste. Place rotting fruit, meat scraps, etc. in a bag in your freezer until garbage day.

Pitch overripe fruit. And until you eradicate the flies, keep all other produce in the fridge or a sealed container.

Pour bleach or boiling water down the drain. This will kill any eggs or remaining adult flies.

#6 Weeds in Patio Cracks

Besides ruining a well-manicured view, resilient weeds can crack or shift your pavement. Again, prevention’s best.

What to do:

Block new growth. Fill the weed-free cracks with asphalt or cement crack filler, sand, or corn gluten meal, which prevents future germination. If you’re too late, you need to…

Pull ‘em. Especially if you don’t want to use an herbicide, which can spread and damage desirable plants. Sorry!

#7 Faded Furnishings from Harsh Sun

You want to throw open the shades and revel in that summer sunshine, but your furnishings and flooring are sensitive to the fading and drying effects of UV rays.

What to do:

Add transparent window film. It shuts out 99% of UVA and UVB rays without blocking sunlight or a welcome view. Today’s films are undetectable when properly installed and won’t tint the light coming into your home.

Spray furnishings with a protectant. Spritz upholstery, curtains, and rugs with a UV-blocking fabric protector and treat wood with a varnish — which provides better sun protection than other types of sealant.

#8 Splinters on the Deck

As long as the decking is in otherwise good shape, your bare feet don’t have to suffer through a gauntlet of splinters again this summer.

What to do:

Resurface it. Apply one of the newer deck restoration products that essentially gives your deck a coating that will prevent splinters. This works best for small splinters, before they’ve gotten too bad.

Sand it.Best if splinters are deep and big. Then apply a water-repelling, UV-resistant sealer.

#9 Dust Mites

Dust mite populations peak in summer’s heat and humidity, inflicting stuffy noses, sneezing, and coughing upon those who are allergic.

What to do:

Make your home inhospitable. Clean more frequently and use your AC to keep indoor humidity to 50% or less.

Get a new pillow. If your pillow is older than three years and has not been washed (experts recommend it twice a year), toss it: It’s likely loaded with dust mites.

#10 Slamming Screen Doors

Slam. Slam. Slam. Annoying, right? Beyond rattling your bliss, this sound of summer can damage the hinges of your screen door.

What to do:

Adjust your door closer. If your door has a closer, find the perfect bang-free tension by simply turning the screw on pneumatic models or rotating the body on hydraulic styles.

Add a closer. It costs just $10 to $20 to retrofit an older screen door.

Apply felt pads to the door frame. How’s that for a low-cost option?

#11 A Patio or Deck That Burns Your Feet

Hot dogs and burgers should be the only things you risk burning on your patio this summer.

What to do:

Throw some shade. Position an umbrella or pergola over frequently used areas.

Add an outdoor rug. Choose a lighter color that won’t absorb as much heat. Plastic styles, in particular, are touted for keeping their cool.

Refinish the surface. Again, choose a lighter color. Resurfacing products and overlays are available for all types of patio and deck surfaces.

#12 Ugly, Dried-Out Brown Grass

Widespread browning, rather than patches of brown grass, has two common causes: lawn care oversights and a cool-season grass going dormant.

What to do:

Sharpen or replace your mower blades. This could be all that’s needed if just the tips of your grass are brown and jagged.

Set the blade height to 3 inches. When you take less off the top, it helps grass absorb water before it evaporates.

Water less frequently, for longer periods of time. This helps grass develop deeper, drought- and disease-resistant roots. Aim for 1 to 1.5 inches of water a week, and even a cool-season grass can keep its green during the summer.

#13 A Smelly Basement

When humid air meets cool surfaces in an unconditioned basement, condensation occurs — setting the stage for mold and mildew, and that noxious, nose-wrinkling smell.

What to do:

Check for other sources of humidity. Leaking floors and walls, improperly vented clothes dryers and bathrooms, poorly graded landscaping, and ill-positioned downspouts all can direct water into the basement.

Buy a dehumidifier sized for your needs. Use the Association of Home Appliance Manufacturers’ “Directory of Verified Dehumidifiers” to find your match.

Set the dehumidifier to “auto” (i.e. running only when needed). Running continuously, even a small model could cost $20 a month.

increasing difficulty for first-time home buyers to save for their down payment

by Terry Sullivan - Lyons-Sullivan Realty

There is increasing difficulty for first-time home buyers to save for their down payment as indicated in the graph.  Several factors that contribute to this trend include rising rents, rising home prices, student loan debt and flat wages.down payment graph.png

Some would-be buyers feel they cannot buy a home today but a large part of those decisions may be based on inaccurate assumptions.

Nine out of ten non-owners believe they need ten percent or more for a down payment. The typical down payment for first-time buyers is six percent. VA has 100% loan programs as well as USDA for certain qualifying areas and buyers. FHA is known for 3.5% down payments. And FNMA and Freddie Mac have down payments as low as 3% and 5%.

There are gift provisions available for buyers who have an “angel” who would like to help them with their down payment.

There are ways to borrow against a person’s qualified retirement program for a down payment. It isn’t necessarily limited to the buyer but could include a relative. Interestingly, a son or daughter can borrow against their retirement to benefit their parents.

In some respects, having good credit and sufficient income is more important than the down payment. Don’t rely on “common knowledge.” Get expert advice and counsel to see if there is a way to advance your dream of owning a home.

5 Newbie Mortgage Mistakes That Are Soooo Easy to Avoid

by Terry Sullivan - Lyons-Sullivan Realty

Can’t wait to cozy up in that cute Colonial, but anxious about signing up for your first mortgage?

We get it. Buying your first home is a big stinking deal. But with a little know-how, it’s easier than expected to make smart mortgage moves and save big bucks over the course of your loan.

By avoiding these mistakes, you can put your home-buying butterflies to rest.

#1 Finding Your Home Before You Find Your Mortgage

How Much It Could Cost You: Enough to send your future kid to college. Seriously, over the life of the loan, you could end up paying tens of thousands of dollars more in interest and fees than you need to.

Why People Mess This Up: If you don’t have your financing buttoned up before you find your dream home, your desire to win the bid could influence you to offer a higher price and overpay on a mortgage because you had no time to shop around. Getting your financing all set before you feel the pressure to make an offer gives you time to qualify for a more attractive loan and gives you the confidence to make a fair offer because you’re a qualified buyer.

How to Avoid It: Start talking to lenders at least three months — maybe even a year — before you start house hunting. Time-consuming tweaks like paying down debt or improving your credit score can have a dramatic effect on overall mortgage costs.

Related: What to Do a Year Before Buying Your First Home

 

How Much House Can You Afford?

Determine how much you can actually afford. More like this.

 

Tax papers stored in a home office

#2 Not Comparing Loans Correctly

How Much It Could Cost You: Just like No. 1 above, you could overpay by tens of thousands over the life your loan.

Why People Mess This Up: First-time buyers often get seduced by a low interest rate and don’t take into account the cost of fees. A lower-interest loan could actually cost you more than one with a higher rate because those fees can be steep enough to outweigh the interest savings, says Matt Oliver, senior loan officer with Lund Mortgage Team in Glendale, Ariz.

How to Avoid It: Compare loans by the annual percentage rate, or APR, not just by interest rate. Each lender should give you a document aptly named “loan estimate.” The APR will be listed there (if it’s not, you don’t want that lender). The APR combines a home loan’s interest rate with closing costs and other fees like points (which is why it’s usually higher than the interest rate), then converts the overall costs to an annual percentage. This gives you an apples-to-apples comparison so you can understand what you’re paying over the life of the loan. You’re welcome!

#3 Falling for Marketing Gimmicks

How Much It Could Cost You: More than enough to buy a good used car (or at least enough to cover Uber fees for a few years).

Why People Mess This Up: ”Lenders use advertising hooks like, ‘We pay your mortgage insurance,’ or ‘You don’t pay the closing costs,’” says Casey Fleming, mortgage adviser in Silicon Valley, Calif., and author of “The Loan Guide: How to Get the Best Possible Mortgage.” Don’t be fooled. “You still pay those costs,” he says. “If you’re not paying in cash, you’re paying it in the interest rate.” Fleming estimates those costs can add a quarter point to an interest rate, which as an example, translates to $9,203 (the difference between a 4% interest rate and one that is 4.25%) for a mortgage of $176,000.

How to Avoid It: Block out the noise. Shop for your mortgage according to trusted recommendations and reliable reviews, not slick deals that sound too good to be true.

#4 Not Budgeting for Your Craft Beer and Yoga Pants

How Much It Could Cost You: Time and money for the things you love to do, like meeting friends over a pitcher of the newest session beer, then hitting the gym in the morning to work it off.

Why People Mess This Up: Lenders qualify you for what you technically can afford on a spreadsheet. They’re looking at your monthly debt-to-income ratio. They don’t look at what you spend your disposable income on: your passions and hobbies. So homebuyers often end up with a mortgage payment they can only afford by scaling back on the things they enjoy.

“One homebuyer may be a homebody, like to cook, and have no pets to pay for,” says Dave Jacobin, president of 1st Mariner Mortgage. “Meanwhile, a second buyer with the exact same income and debt situation might travel every weekend, enjoy fine dining, or shop a lot. Lenders can’t look at that.”

How to Avoid It: Track your spending monthly, so you really know how much you spend. Factor fun into your future when deciding which mortgage offer is the best fit. “Two years into your home purchase, you want to be happy you did it,” says Jacobin. “You don’t want to be mortgage poor.”

#5 Not Knowing How to Eyeball the Paperwork

How Much It Could Cost You: Thousands of dollars in surprise closing costs.

Why People Mess This Up: Because the paperwork seems so freaking daunting. But good news: As of October 2015, new mortgage rules require lenders to send you paperwork that actually makes sense.

This new paperwork comes in two different documents. It’s much easier to scan and understand than the old paperwork, which used to be the model for everything bad about tiny legal print.

1. The loan estimate will come first. Here are some key things to look for:

  • The APR (see No. 2 above)
  • The interest rate
  • The monthly payment
  • The loan terms, such as a 30-year or 15-year mortgage, adjustable rate or fixed
  • The total cost of the loan
  • Cash amount you’ll need at closing

2. The closing document will come at least three days before you close. It should look just like the first document, but instead of estimates it will have final numbers. If you see any increases or additional fees you weren’t expecting, question the lender immediately. Because if it shows even a tenth of a percent interest-rate jump you weren’t expecting (say 4.1% instead of 4%) — and you don’t question it — that could mean a difference of almost $3,700 on a $176,000 mortgage.

How to Avoid It: Watch for those docs. Review and compare them. And, most importantly, don’t be afraid to speak up if you spot a surprise. Now, how easy was that?

5 Surprising (and Useful!) Ways to Save for a Down Payment

by Terry Sullivan - Lyons-Sullivan Realty

Buying your first home conjures up all kinds of warm and fuzzy emotions: pride, joy, contentment. But before you get to the good stuff, you’ve got to cobble together a down payment, a daunting sum if you follow the textbook advice to squirrel away 20% of a home’s cost.

Here are five creative ways to build your down-payment nest egg faster than you may have ever imagined.

1. Crowdsource Your Dream Home

You may have heard of people using sites like Kickstarter to fund creative projects like short films and concert tours. Well, who says you can’t crowdsource your first home? Forget the traditional registry, the fine china, and the 16-speed blender. Use sites like Feather the Nest and Hatch My House to raise your down payment. Hatch My House says it’s helped Americans raise more than $2 million for down payments.

 

Less Than 20% Down?

Learn more about a PMI. More like this.

 

Gray home exterior and tree-filled yard

2. Ask the Seller to Help (Really!)

When sellers want to a get a deal done quickly, they might be willing to assist buyers with the closing costs. Fewer closing costs = more money you can apply toward your deposit.

“They’re called seller concessions,” says Ray Rodriguez, regional mortgage sales manager for the New York metro area at TD Bank. Talk with your real estate agent. She might help you negotiate for something like 2% of the overall sales price in concessions to help with the closing costs.

There are limits on concessions depending on the type of mortgage you get. For FHA mortgages, the cap is 6% of the sale price. For Fannie Mae-guaranteed loans, the caps vary between 3% and 9%, depending on the ratio between how much you put down and the amount you finance. Individual banks have varying caps on concessions.

No matter where they net out, concessions must be part of the purchase contract.

Related: New Law Protects You from Surprise Closing Costs

3. Look into Government Options

The U.S. Department of Housing and Urban Development, or HUD, offers a number of homeownership programs, including assistance with down payment and closing costs. These are typically available for people who meet particular income or location requirements. HUD has a list of links by state that direct you to the appropriate page for information about your state.

HUD offers help based on profession as well. If you’re a law enforcement officer, firefighter, teacher, or EMT, you may be eligible under its Good Neighbor Next Door Sales Program for a 50% discount on a house’s HUD-appraised value in “revitalization areas.” Those areas are designated by Congress for  homeownership opportunities. And if you qualify for an FHA-insured mortgage under this program, the down payment is only $100; you can even finance the closing costs.

For veterans, the VA will guarantee part of a home loan through commercial lenders. Often, there’s no down payment or private mortgage insurance required, and the program helps borrowers secure a competitive interest rate.

Some cities also offer homeownership help. “The city of Hartford has the HouseHartford Program that gives down payment assistance and closing cost assistance,” says Matthew Carbray, a certified financial planner with Ridgeline Financial Partners and Carbray Staunton Financial Planners in Avon, Conn. The program partners with lenders, real estate attorneys, and homebuyer counseling agencies and has helped 1,200 low-income families.

4. Check with Your Employer

Employer Assisted Housing (EAH) programs help connect low- to moderate-income workers with down payment assistance through their employer. In Pennsylvania, if you work for a participating EAH employer, you can apply for a loan of up to $8,000 for down payment and closing cost assistance. The loan is interest-free and borrowers have 10 years to pay it back.

Washington University in St. Louis offers forgivable loans to qualified employees who want to purchase housing in specific city neighborhoods. University employees receive the lesser of 5% of the purchase price or $6,000 toward down payment or closing costs.

Ask the human resources or benefits personnel at your employer if the company is part of an EAH program.

5. Take Advantage of Special Lender Programs

Finally, many lenders offer programs to help people buy a home with a small down payment. “I would say that the biggest misconception [of homebuying] is that you need 20% for the down payment of a house,” says Rodriguez. “There are a lot of programs out there that need a total of 3% or 3.5% down.”

FHA mortgages, for example, can require as little as 3.5%. But bear in mind that there are both upfront and monthly mortgage insurance payments. “The mortgage insurance could add another $300 to your monthly mortgage payment,” Rodriguez says.

Some lender programs go even further. TD Bank, for example, offers a 3% down payment with no mortgage insurance program, and other banks may have similar offerings. “Check with your regional bank,” Rodriguez says. “Maybe they have their own first-time buyer program.”

Not so daunting after all, is it? There’s actually a lot of help available to many first-time buyers who want to achieve their homeownership dreams. All you need to do is a little research — and start peeking at those home listings!

Displaying blog entries 1-10 of 42