Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership,” which revealed that “eighty percent of consumers either are unaware of how much lenders require for a down payment or believe all lenders require a down payment above 5 percent.”
Myth #1: “I Need a 20% Down Payment”
Buyers often overestimate the down payment funds needed to qualify for a home loan. According to the same report:
“Consumers are often unaware of the option to take out low-down-payment mortgages. Only 19% of consumers believe lenders would make loans with a down payment of 5% or less… While 15% believe lenders require a 20% down payment, and 30% believe lenders expect a 20% down payment.”
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In the blink of an eye, Starbucks holiday cups are gone, all of the ornaments are tucked away, and most of those good intentioned New Year’s resolutions have fallen victim to the hustle and bustle of everyday life. Emerging from the fog of all of the holiday distractions are buyers eager and ready to purchase their next home.
In just two weeks, demand has increased 22% while supply has only increased 2%. To understand why the market is changing so rapidly, let’s dust off that old Econ 101 book that details supply and demand. When there is a lot of supply and very little demand, prices fall, which favors
The results of the latest Rent vs. Buy Report from Trulia show that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.
The updated numbers actually show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!
Other interesting findings in the report include:
Interest rates have remained low and, even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
With rents & home values moving in tandem, shifts in the ‘rent vs. buy’ decision are largely driven by changes in mortgage interest rates.
“The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
The top reason millennials choose to buy is to have control over their living space, at 93%.
Many millennials who rent a home or apartment prior to buying their own homes dream of the day when they will be able to paint the walls whatever color they’d like, or renovate an outdated part of their living space.
Active Inventory: A chronic lack of inventory defined 2017 and the year finished at levels not seen since 2013.
The year started with an active inventory of 4,071 homes on the market and ended with 3,560. It was the second lowest start to a year behind 2013. Ever since the Great Recession, the trend has been fewer homeowners selling their homes. Since 2009, the number of homes placed on the market has diminished by 28% compared to the heydays of 2000 through 2007. In 2017, the issue was magnified with 6% fewer homes coming on the market compared to 2016.
Cutting into the inventory a bit were closed sales. In 2017, closed sales were nearly identical to 2016 despite fewer homes coming on the market.
Homeownership is a major part of the American Dream. As evidence of that, 91% of Americans believe that owning a home is either essential (43%) or important (48%) to achieving that “dream.” In a market where some people may be unsure about the benefits and possibilities of buying a home, it is important that we remember this.
Homeownership is NOT just about the money. In fact, some of the major benefits are non-financial. Here are a few of those benefits as per the National Association of Realtors:
Consistent findings show that homeownership does make a significant positive impact on educational achievement.
Several researchers have found that homeowners tend to be more involved in their communities than renters.